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BISOCIALISM 


THE  REIGN  OF  THE 
MAN  AT  THE  MARGIN 


BY 

OLIVER   R.  TROWBRIDGE 


If  any  man  is  able  to  convince  me  or  show  me  that 
I  do  not  think  right,  I  will  gladly  change,  for  I  seek 
the  truth,  by  which  no  man  was  ever  injured. 

— Marcus  Aurelius. 


New  York :  35  Nassau  Street. 
MOODY  PUBLISHING   COMPANY. 

Chicago :  79  Dearborn  Street. 


COPTBIGHT,    1903, 
BY 

OLIVER    R.    TROWBRIDGE. 


K6iK 


Co  my  tDtfc, 
Hlice  C.  XTrowbrl^ae, 

wljose  labor  anb  sacrifices  Ijar>e  mabe  its 

publication  possible,  ttjis  book 

is  gratefully  bebicateb. 


500408 


PREFACE 


When  a  boj  thirteen  years  of  age  residing  on  a  farm  in 
central  Illinois,  I  one  day  read  in  a  Chicago  paper  a 
diseussion  concerning  the  hard  times  of  1873,  in  which 
some  reference  was  made  to  "the  present  conflict  between 
capital  and  labor.''  I  do  not  remember  any  other  part  of 
the  discussion,  but  these  words  attracted  my  attention  and 
became  fixed  in  my  memory.  At  that  time  I  had  never 
seen  a  work  on  Political  Economy,  and  it  is  doubtful  if 
I  had  ever  heard  the  term  political  economy  used.  How- 
ever, I  set  myself  to  work  upon  the  question  of  the  seem- 
ing conflict  between  capital  and  labor  referred  to  in  the 
newspaper  discussion.  I  do  not  know  just  how  long  I 
pondered  over  it,  without  any  guidance  but  my  own 
limited  experience,  but  while  still  a  boy  I  came  to  a 
decision  upon  the  subject  and  formulated  it  in  these 
words:  "Naturally  there  is,  and  logically  there  can  be, 
no  conflict  between  capital  and  labor."  From  this  con- 
clusion I  have  never  departed. 

Some  time  after  this  I  began  to  have  access  to  books 
upon  the  subject  of  Political  Economy  and  read  even  the 

5 

500408 


()  PREFACE 

(Iryest  of  them  with  avidity.  In  the  summer  of  1883  I 
read  Henry  George's  Progress  and  Poverty,  an  original 
work  of  great  power  and  clearness,  in  which  was  first 
elaborated  the  doctrine  of  taking  ground  rent  for  public 
revenue.  In  1893  I  became  acquainted,  through  transla- 
tions and  reviews,  with  the  works  of  the  Austrian  econo- 
mists. From  them  I  received  the  suggestion  that  prima- 
rily value  is  not  a  matter  of  labor  cost,  but  of  utility. 
Their  discussions,  while  purely  theoretical  and  in  many 
ways  unsatisfactory  and  incomplete,  led  me  to  develop 
and  apply  to  economic  conditions  the  theory  of  value 
presented  in  the  following  pages.  The  illustrations  used 
in  Chapter  IV  of  Part  I  in  the  analysis  of  utility  and 
disutility  are  taken  largely  from  the  writings  of  the 
Austrian  school. 

I  began  WTiting  this  book  ten  and  a  half  years  ago. 
For  a  long  time  I  clung  to  many  of  the  terms  and  defini- 
tions, and  to  som^  of  the  doctrines  of  standard  Political 
Economy,  but  was  finally  forced  to  abandon  nearly  all 
of  them  and  to  invent  terms  and  to  formulate  definitions 
as  well  as  doctrines  distinctively  my  own.  For  this  I  offer 
no  apology.  It  was  not  done  merely  in  order  to  present 
something  new,  or  something  old  in  a  new  form,  but 
because  new  thoughts  and  principles  were  necessary  and 
could  not  be  stated  adequately  with  the  old  terms  and  in 


PREFACE  7 

the  old  way.  Of  about  one  hundred  economic  terms  spe- 
cifically defined  or  definitely  used  in  these  pages,  nearly 
one-half  are  original  in  nomenclature  and  practically  all 
in  definition  or  application.  All  of  the  new  terms,  how- 
ever, are  such  as  tend  to  explain  or  define  themselves. 

To  those  friends  who  have  so  cheerfully  and  loyally 
assisted  me  in  the  preparation  of  this  work,  I  desire  to 
express  my  heartfelt  thanks  and  appreciation. 

July  4,  1903.  Oliver  R.  Trowbridge. 


CONTENTS 


PART   I 

ECONOMICS 

CHAPTER.  PAGE. 

I.    Of  the  Economic  Problem 13 

II.     Of  Coxflicting  Theories 23 

III.  Of  Utility  and  Disutility 34 

IV.  Of  the  Marginal  Labor-Form 46 

V.     Of   IxorsTRY  and  Exchange 59 

VI.     Of  the  Marginal  Pair 73 

VII.     Of  Value  and  Cost 87 

VIII.     Of  the  Socialization  of  Utility 98 

IX.     Of  Measurable  Utility  and  Disutility 104 

X.     Of  the  PosITI^'E  Theory  of  Value 114 

XI.     Of  the  Origin  of  Values 127 

XII.     Of  Marginal  and  Differential  Values 142 

XIII.  Of  Ground  Rent  and  Ground  Value 157 

XIV.  Of  Land   Tenure 171 

XV.     Of  Ground  Rent,  Wages  and  Interest 184 

XVI.     Of  the  Economic  Standard  of  Valute 193 

PABT   II 
POLITICAL    EC0N03IY 

I.     Of  the  Medium  of  Esch.vnge 201 

II.     Of    Current   Credit-Forms 213 

III.     Of  Monopoly  and  Franchise  Values 228 

IV.    Of  the  Socialization  of  Values 246 

9 


10  CONTENTS 

CHAPTER.  PAGE. 

V.    Of  the  Economic  Imperative 258 

VI.     Of  the  Established  Order 264 

VII.    Of  Omnisocialism 279 

VIII.     Of    Bisocialism 293 

IX.    Of  Equality  of  Opportunity 307 

X.     Of  Compensation 319 

XI.     Of  Public  Utilities 333 

XII.     Of  Economic  Evolution 345 

XIII.  Of  the  Individualization  of  Values 363 

XIV.  Of  Inadequate  Reforms  and  Remedies 380 

XV.    Of  Social  Disutilities 394 

XVI.    Of    Social   Solidabity 409 


PART     I 

ECONOMICS 


Make  for  thyself  a  definition  or  description  of  the  thing 
which  is  presented  to  thee,  so  as  to  see  distinctly  what  kind 
of  a  thing  it  is  in  its  substance,  in  its  nudity,  in  its  complete 
entirety,  and  tell  thyself  its  proper  name,  and  the  names  of 
the  things  of  which  it  has  been  compounded,  and  into  which 
it  will  be  resolved.  For  nothing  is  so  productive  of  elevation 
of  mind  as  to  be  able  to  examine  methodically  and  truly  every 
object  which  is  presented  to  thee  in  life,  and  always  to  look 
at  things  so  as  to  see  at  the  same  time  what  kind  of  universe 
this  is,  and  what  value  everything  has  with  reference  to  the 
whole,  and  what  with  reference  to  man. 

Marcus  Aurelius. 


12 


BISOCIALISM 


PART    I 

ECONOMICS 


CHAPTER  I. 

OF   THE    ECONOMIC    PROBLEM. 

My  soul  is  sick  with  every  day's  report 

Of  wrong  and  outrage  with  which  earth  is  filled. 

Cowper. 
A  new  and  fair  division  of  the  goods  and  rights  of  this 
world  should  be  the  main  object  of  those  who  conduct  human 
affairs.  De  TocqiieviUe. 

The  young  man  of  to-day  who  stands  upon  the  threshold 
of  business  life  is  confronted  by  a  serious  problem.  If 
he  chooses  a  professional  career,  he  sees  before  him  a 
long  and  expensive  course  of  preparation  which,  as  a 
rule,  only  those  can  take  who  have  unusual  advantages 
of  education  or  financial  support.  Yet  when  he  completes 
this  preparation  he  finds  himself  to  be  only  one  of  a 
multitude,  apparently,  of  young  men  for  whom  there  seem 
to  be  no  available  opportunities.  If  he  chooses  a  com- 
mercial career,  he  sees  but  small  chance  for  a  man  of  no 

13 


14  BISOCIALISM— ECONOMICS 

means  or  of  only  moderate  means  to  engage  in  any 
pursuit  with  reasonable  hope  of  success.  Statisticians  of 
repute  tell  him  that  of  all  business  enterprises  undertaken 
over  95  per  cent  ultimately  fail.  If  he  has  no  financial 
means  or  but  small  means  at  his  command,  his  only  pros- 
pect seems  to  be  a  life  of  salaried  service  in  the  employ- 
ment of  another — probably  in  the  employment  of  a  great 
corporation.  If  he  turns  from  these  professional  and 
commercial  prospects  to  till  the  soil,  he  is  met,  where 
farming  is  most  profitable,  by  a  demand  for  approximately 
one-half  of  all  he  can  earn,  one  year  with  another,  for 
the  privilege  of  tilling  a  given  piece  of  ground — for  the 
mere  privilege  of  living  and  working  upon  the  earth. 

The  problem  which  faces  the  average  man  of  middle 
age  is  almost  as  serious  as  that  which  confronts  the  man 
who  is  just  beginning  to  meet  life's  responsibilities.  If  a 
man  in  middle  life  has  a  profession,  he  sees  the  field  be- 
coming crowded  with  young  men  just  out  of  school;  and 
while  these  competitors  themselves  scarcely  live,  they 
secure  enough  business  to  cut  down  his  income,  or  at  least 
to  prevent  it  from  increasing  as  formerly.  If  he  is  a 
merchant,  he  sees  his  trade  gradually  dwindling  away 
because  of  the  department  store  and  the  mail  order  house 
with  which  he  must  compete  with  odds  against  him.  If 
he  is  a  small  manufacturer,  he  sees  himself  giving  way 
little  by  little  before  the  merciless  competition  of  the  trust. 
If  a  tenant  farmer,  he  sees  his  rents  rising  year  by  year, 
while  the  increase  in  the  price  of  lands  makes  it  more 
difficult  for  him  to  secure  even  a  small  farm  of  his  own. 
If  he  is  a  wage  earner,  he  realizes  that  his  position  be- 


OF  THE  ECONOMIC  PROBLEM  15 

comes  more  precarious  every  day,  and  that  to  lose  his 
employment  is  a  calamity  most  fearful  for  himself  and 
those  dependent  upon  him  to  contemplate. 

But  of  all  persons  who  must  live  by  their  labor  from 
year  to  year  the  man  who  is  approaching  old  age  has 
most  to  dread.  In  the  economy  of  the  present  day  there 
is  no  place  for  the  old  man.  Although  he  may  have 
served  faithfully  for  thirty  or  even  forty  years,  he  fears 
more  and  more  as  the  weeks  go  by  that  with  the  next 
pay  envelope  he  will  receive  the  notice,  becoming  well 
nigh  inevitable,  that  his  services  are  no  longer  needed.  He 
looks  forward  to  the  time  when,  like  an  old  horse,  he  will 
be  turned  out  to  die. 

In  such  circumstances  it  is  not  strange  that  men  are 
discussing  as  never  before  the  evils  which  now  befall  the 
masses,  and  that  they  ask  of  Economic  Science  some  ex- 
planation of  the  origin  of  these  evils  and  demand  of  it  a 
remedy.  In  vain  has  workman  delved,  inventor  planned, 
and  scientist  sought  the  laws  of  force  and  life;  in  vain 
has  patriot  died  and  statesman  wrought  unless  the  econo- 
mist shall  solve  the  problem  which  confronts  him.  People 
see  readily  enough  that  the  miseries  of  the  established 
order  can  not  be  for  lack  of  sufficient  property  for  all, 
because  while  many  are  in  want,  or  in  dire  fear  of  want, 
a  few  persons  are  possessed  of  fortunes  beyond  the  dreams 
of  avarice. 

The  conviction  is  growing  among  all  the  classes  we 
have  considered  that  the  trouble  lies  in  the  laws  which 
affect  the  distribution  of  property.  But  when  they  turn 
to  Economic  Science  for  a  satisfactory  solution  of  this 


t;  bisocialism— economics 

matter,  they  are  confronted  by  so  many  divergent  and 
conflicting  theories  upon  every  phase  of  every  question 
tliat  they  are  likely  to  become  discouraged  and  to  conclude 
that  a  clear  and  complete  solution  of  economic  problems 
is  impossible.  They  find  not  only  that  different  writers 
uphold  different  theories,  but,  with  one  or  two  notable 
exceptions,  given  writers  upon  economic  subjects  uphold 
theories  upon  various  phases  of  their  themes  which  are 
iitterly  inconsistent  with  one  another.  It  seems  impos- 
sible to  take  the  writings  of  any  writer  or  school  of  writers 
upon  economic  subjects,  and  from  such  writings  frame 
a  complete  treatise  of  Economic  Science  consistent  in  all 
its  parts.  Yet  when  fully  analyzed  all  theories  which 
have  been  or  m'ay  hereafter  be  advanced  along  economic 
lines  may  be  classified  as  supporting  one  of  three  schools 
of  thought.  All  such  theories  are  either  anarchistic  in 
their  tendencies,  or  they  tend  to  support  the  established 
order  substantially  as  it  exists,  or  they  tend  to  support 
some  form  of  socialism. 

In  a  later  chapter  we  shall  ascertain  the  proper  scope 
of  Economic  Science,  and  define  and  distinguish  its  two 
branches — Economics  and  Political  Economy.  For  the 
present  it  is  sufficient  to  say  that  the  general  subject 
which  we  are  to  pursue  has  to  do  with  the  question. 
What  should  be  the  policy  of  the  State  with  reference  to 
the  institution  of  property?  This  is  the  economic  prob- 
lem. By  the  "State"  we  mean  throughout  this  discussion 
the  body  politic  commonly  called  the  Government, 
whether  this  body  politic  manifests  itself  in  the  nation, 
the  political  division  called  a  state,  or  territory,  or  prov- 


OF  THE  ECONOMIC  PROBLEM         17 

ince,  or  any  subdivision  of  these,  such  as  county,  city  or 
other  municipality.  By  the  "institution  of  property"  we 
mean  property  with  reference  to  its  legal  status — ^the  sum 
total  of  what  we  usually  call  property  rights  under  the 
law.  The  State  determines  what  shall  be  deemed  prop- 
erty, fixes  and  regulates  the  tenure  by  which  it  is  held, 
and  undertakes  to  protect  the  owner  of  property  in  the 
enjoyment  thereof. 

Viewed  as  a  whole,  Economic  Science  presents  a  double 
aspect.  Upon  the  one  hand  it  raises  questions  concerning 
the  nature,  the  proper  sphere  and  functions  of  govern- 
ment, and  even  of  its  raison  d'etre  (reason  for  existence). 
Upon  the  other  hand  it  raises  two  fundamental  questions 
concerning  the  legal  status  of  property;  first,  What  things 
are  rightfully  the  subject  of  property?  and,  second,  "What 
should  be  the  policy  of  the  State  with  reference  to  the 
individualization  or  socialization,  or  both,  of  those  things 
which  are  rightfully  the  subject  of  property? 

From  the  first  point  of  view  the  most  fundamental 
question  raised  by  our  inquiry  is  that  of  the  raison  d'etre 
of  government.  Upon  this  question  all  men  are  divided 
into  two  classes;  they  are  either  anarchists  or  government- 
alists. 

Were  it  not  for  the  mistaken  notions  which  prevail  even 
among  persons  generally  well  informed  concerning  an- 
archists and  anarchism,  we  should  pass  these  people  and 
their  doctrines  without  discussion.  As  it  is,  we  are  im- 
pelled to  say  that  anarchists  themselves  are  divided  into 
two  classes  as  different  from  each  other  as  light  from 
darkness.     They  all  see  the  e^^ls  of  misgovernment,  past 


18  BISOCIALISM— ECONOMICS 

and  present,  and  conclude  that  these  evils  are  inherent 
attributes  of  every  form  of  government,  and  that  the  only 
remedy  is  the  abolition  of  all  government.  They  agree, 
also,  that  all  government  is  based  solely  upon  physical 
force.  But  here  they  part.  One  class  believes  in  oppos- 
ing force  with  force,  and  some  individuals  even  believe  in 
removing  rulers  by  assassination.  These  anarchists  of  the 
sanguinary  type  we  shall  call  revolutionary  anarchists. 
They  are  comparatively  few  in  number,  but  their  occa- 
sional deeds  of  violence,  especially  against  the  heads  of 
governments,  give  them  and  their  doctrines  great  promi- 
nence, and  all  anarchists  are  indiscriminately  condemned 
along  with  them  in  the  public  mind. 

The  other  class  of  anarchists  take  an  exactly  opposite 
view  of  the  situation.  Being  opposed  to  government  be- 
cause it  is  based,  as  they  maintain,  upon  physical  force, 
they  do  not  deem  it  consistent  to  oppose  it  with  force, 
and  do  not  advocate  resort  to  force  in  any  circumstances. 
They  are  even  less  participant  in  government  than  the 
Quakers.  An  anarchist  of  this  philosophic  type — an  evo- 
lutionary as  distinguished  from  a  revolutionary  anarchist 
— not  only  refuses  to  oppose  government  with  force,  but 
he  refuses  voluntarily  to  uphold  it  even  with  his  vote.  He 
not  only  has  conscientious  scruples  against  being  a  soldier, 
but  against  being  a  part  of  the  civil  machinery  of  govern- 
ment in  any  way.  Yet  in  matters  in  which  he  has  no 
choice  he  yields  peaceably  to  the  government.  He  will 
not  vote,  because  voting  is  not  compulsory.  But  he  will 
pay  taxes  and  do  other  similar  things  under  compulsion 
without  any  show  or  even  thought  of  physical  resistance. 


OF  THE  ECONOMIC  PROBLEM  lir 

In  this  attitude  of  peaceableuess  he  has  no  superior. 
He  talks  against  the  existence  of  government  even  where 
speech  is  not  free;  hut  he  favors  the  abolition  of  govern- 
ment by  peaceable  means.  The  mode  of  procedure  which 
he  advocates  is  the  abolition  of  the  exercise,  one  after 
another,  of  the  various  functions  of  government  as  now 
constituted.  This,  if  carried  out,  will  bring  about  a  state 
of  non-government  in  which  every  man,  according  to  this 
doctrine,  will  do  as  he  sees  fit,  without  injury  or  hindrance 
to  any  other  man  in  the  enjoyment  of  equal  freedom. 
This  is  the  ideal  of  evolutionary  anarchy.  Unless  Eco- 
nomic Science  can  refute  the  claim  of  the  anarchist  that 
such  a  consummation  is  possible  in  the  absence  of  govern- 
ment (and  only  in  the  absence  of  government),  the  police 
power  of  the  State  will  struggle  with  him  in  vain. 

The  theory  of  the  evolutionary  anarchists  does  not 
imply  that  under  an  anarchistic  regime  every  man  would 
isolate  himself,  and  that  there  would  be  nothing  of  the 
cooperation  of  modern  life.  Quite  the  contrary.  Such 
anarchists  believe  in  cooperation;  they  would  live  and 
work  together  in  communities,  but  their  cooperation  as  well 
as  their  communism  would  be  purely  voluntary.  There 
would  be  no  body  politic  to  say  to  any  man  "thou  shalt" 
and  "thou  shalt  not."  Nor  could  any  man  say  these 
things  to  another  with  authority. 

It  is  conceded  by  evolutionary  anarchists  that  under  the 
system  which  they  advocate  great  cities  with  their  sky- 
scraping  buildings,  myriads  of  luxuries,  and  gigantic 
business  enterprises  would  not  exist.  But  neither,  they 
claim,  would  there  be  any  jails,  penitentiaries,  poorhouses, 


20  BISOCIALISM— ECONOMICS 

insane  asylums  or  suicides.  These  things,  say  the  an- 
archists, are  the  price  which  we  now  pay  for  the  so-called 
advantages  of  a  false  civilization. 

Opposed  to  the  anarchists  are  all  persons  who  advocate 
the  maintenance  of  government.  Such  persons  we  have 
called  governmentalists.  All  persons,  therefore,  favor 
either  anarchism  or  governmentalism. 

Anarchism  is  that  condition  of  society  which  prevails 
in  the  absence  of  all  forms  of  governmental  polity. 

Governmentalism  is  that  condition  of  society  which  pre- 
vails under  any  form  of  governmental  polity. 

A  distinction  must  be  made  between  anarchism  and 
individualism.  Individualism  does  not  imply  an  entire 
negation  of  government,  but  simply  a  limitation  upon  its 
activities  in  certain  directions  and  especially  in  the  matter 
of  its  polity  toward  property,  property  values  and  indus- 
trial enterprises.  Individualism,  while  distinctly  negative 
in  character,  constitutes  a  form  of  governmental  polity. 

Individualism  is  that  form  of  governmental  polity  by 
virtue  of  which  the  State  leaves  property,  property  values 
and  industrial  enterprises  to  individual  ownership,  opera- 
tion and  control. 

The  doctrines  of  all  governmentalists  tend  either  to 
uphold  the  established  order  substantially  as  it  exists, 
simply  increasing  its  individualism  a  little  here  or  its  so- 
cialism a  little  there;  or  to  substitute  for  the  established 
order,  or  for  some  material  part  of  it,  a  form  of  systemic 
socialism. 

Socialism  is  that  form  of  governmental  polity  by  virtue 
of  which  the  State  takes  unto  itself  property,  property 


OF  THE  ECONOMIC  PROBLEM  31 

values  and  industrial  enterprises  for  the  common  use  and 
benefit  of  all  the  people. 

In  the  established  order  there  are  several  socialistic 
features,  but  they  are  unrelated  to  one  another  and  do  not 
constitute  essential  parts  of  a  distinctively  socialistic  sys- 
tem. The  postoffice  department  of  our  national  govern- 
ment is  such  a  socialistic  feature;  the  public  schools 
maintained  in  the  several  states  furnish  another  illustra- 
tion. Yet  there  is  at  present  no  well-defined  economic 
relation  between  these  socialistic  features;  either  might 
exist  without  the  other.  Such  examples  of  socialism  in 
present  conditions  are  purely  sporadic.  The  governments 
v/hich  maintain  them  disclaim  any  intent  to  establish 
systemic  socialism  to  any  degree  in  any  of  their  depart- 
ments. 

Sporadic  Socialism  is  that  form  of  socialism  in  which 
the  various  socialistic  features  of  government  are  unrelated 
to  one  another  and  do  not  constitute  essential  parts  of  a 
distinctively  socialistic  system. 

Systemic  Socialism  is  that  form  of  socialism  in  which 
the  various  socialistic  features  of  government  are  related 
to  one  another  and  constitute  essential  parts  of  a  distinc- 
tively socialistic  system. 

The  fact  that  the  established  order  maintains  purely 
socialistic  features  without  committing  itself  to  socialism 
as  a  system  in  any  degree  is  the  result  of  the  individualistic 
conceptions  which  pervade  the  common  thought.  These 
conceptions  are  expressed  in  such  aphorisms  as  these: 
"That  government  is  best  which  governs  least."  "The 
less  government  the  better,  provided  the  end  be  attained." 


22  BISCK^IALISM— ECONOMICS 

Such  conceptions  of  individualism  are  strongly  impreg- 
nated with  truth,  but  the)'  are  as  sporadic  in  their  incep- 
tion and  application  as  are  the  conceptions  of  sporadic 
eocialism.  Individualism  as  it  is  manifested  to-day  as  a 
governmental  polity  is  simply  a  negation.  It  acts  merely 
ari  a  check  upon  the  tendency  toward  sociali-sm;  it  has  no 
definite  and  complete  doctrine,  working  plan  or  program 
of  its  own;  nor  does  it  point  to  any  distinct  line  of 
demarcation  between  those  things  which  are  within  the 
proper  sphere  and  purview  of  government  and  those  which 
are  not. 

Those  persons  whose  doctrines  tend  to  uphold  present 
conditions  we  shall  call  standard  economists.  Some  of 
their  doctrines  are  socialistic  and  others  are  individualistic 
in  their  tendencies.  Indeed,  in  one  respect  the  standard 
economists  agree  with  the  anarchists,  for  like  the  anarcli- 
ists  they  believe  that  government — the  body  politic — is 
an  evil.  Like  the  socialists,  on  the  other  hand,  they 
believe  that  government  is  necessary.  According  as  the 
standard  economists  incline  toward  one  or  the  other  of 
these  inconsistent  doctrines,  they  advocate  the  curtailment 
or  the  increase,  respectively,  of  governmental  powers  and 
functions,  but  not  to  the  extent  of  anarchy  upon  the  one 
hand  nor  of  systemic  socialism  upon  the  other. 


CHAPTEE  II. 

OF   CONFLICTING   THEORIES. 

Hate  not  each  other  because  you  differ  in  opinion — rather 
love  each  other;  for  it  is  impossible  that  in  such  a  variety  of 
sentiments  there  should  not  be  some  fixed  point  on  which  all 
men  ought  to  unite.  Zoroaster. 

Anarchy  is  based  upon  the  theory  that  government  is 
both  evil  and  unnecessary,  and  that,  being  an  unnecessary 
evil,  it  should  be  abolished.  The  established  order  is 
based  upon  the  conception  that  while  government  is  an 
evil,  it  is  a  necessary  evil,  and  must  be  maintained  at 
whatever  cost.  In  his  "Politics  for  Young  Americans" 
Charles  Nordhoff  expressed  the  current  theory  of  govern- 
ment as  follows:  "Governments  may  be  said  to  be  neces- 
sary evils,  their  necessity  arising  out  of  the  selfishness  and 
stupidity  of  mankind." 

The  conception  of  socialism  concerning  the  nature  and 
necessity  of  government  differs  wholly  from  that  of  an- 
archy, and  also,  upon  one  point,  from  that  expressed  by 
Mr.  Xordhoff.  Socialism  regards  government  not  only  as 
necessary,  but  as  a  necessary  good.  It  regards  government 
as  arising  not  out  of  the  stupidity,  but  out  of  the  intelli- 
gence of  mankind;  and  not  out  of  their  selfishness,  but 
rather  out  of  their  common  desire  for  more  complete 
cooperation.  The  conceptions  of  these  different  schools 
with  reference  to  the  proper  sphere  and  functions  of  gov- 
ernment will  be  left  for  discussion  in  a  future  chapter;   it 

23 


24  BISOCIALISM— ECONOMICS 

being  understood,  of  course,  that  all  anarchists  deny  to 
the  State  any  proper  sphere  or  function  with  reference 
either  to  persons  or  property.  The  remainder  of  our 
discussion  will  have  to  do  chiefly  with  those  who  are  gov- 
ernmentalists  of  one  school  or  the  other;  either  upholders 
of  the  established  order — standard  economists— or  social- 
ists. Each  of  these  schools  is  divided  into  two  classes  or 
factions.  The  theories  of  one  faction  of  the  standard 
economists  tend  to  uphold  the  established  order  substan- 
tially without  change;  the  members  of  this  faction  con- 
stitute the  conservatives  of  modern  politics.  The  theories 
of  the  other  faction  tend  to  change  the  established  order 
in  certain  details  or  along  certain  lines,  but  without 
fundamentally  attacking  any  existing  institution.  The 
members  of  this  faction  m'ay  be  distinguished  in  a  general 
■way  as  the  liberals  of  modern  politics. 

Upon  the  question  as  to  what  may  rightfully  be  made 
the  subject  of  private  property  the  standard  economists 
say,  in  substance,  that  all  things  which  are  now  treated  as 
such  property  are  rightfully  so  treated.  No  distinction  is 
made  by  them  between  things  which  are  the  gifts  of  nature 
and  things  which  are  distinctively  the  result  of  the  mental 
and  physical  exertion  of  man.  They  unqualifiedly  uphold 
private  property  in  natural  opportunities  as  well  as  in 
labor  products.  There  is  nothing  outside  of  our  fellow 
men  which  we  can  succeed  in  appropriating  that  is  not 
recognized  as  a  fit  subject  of  private  property  under  the 
present  system.  If  air  and  sunshine  were  susceptible  of 
private  and  exclusive  appropriation,  they  would  also  be 
treated  as  private  property  under  the  theory  of  the  stand- 


OF  CONFLICTING  THEORIES  25 

ard  economists.  Indeed,  both  air  and  sunshine  are  sus- 
ceptible of  private  appropriation  and  control  to  a  slight 
degree,  and  just  to  that  degree  they  are  made  the  subject 
of  private  property.  Suits  at  law  sometimes  arise  in  our 
courts  which  involve  nothing  except  a  claim  upon  one 
side  to  uninterrupted  use  of  light  and  air  in  a  given 
locality,  and  upon  the  other  side  a  claim  to  the  legal  right 
to  intercept  such  use  by  the  improvement  of  adjoining 
realty  or  otherwise. 

Upon  the  question  of  the  individualization  or  socializa- 
tion of  property  standard  economists  also  tend  to  maintain 
that  whatever  is,  is  substantially  right.  In  some  of  its 
features  the  established  order  tends  strongly  towards  in- 
dividualism; in  others  it  upholds  and  maintains  features 
which  are  purely  socialistic.  The  postoffice  and  the  public 
school  are  excellent  examples  of  socialism.  Yet  the  gen- 
eral trend  of  the  established  order  may  be  said  to  be 
towards  individualism.  While  supporting  both  of  these 
tendencies  so  far  as  they  are  exemplified  in  present  condi- 
tions, standard  Political  Economy  indicates  no  clear  line 
of  demarcation  between  them.  It  points  out  no  criterion 
by  which  it  may  be  definitely  and  positively  determined 
whether  a  certain  kind  of  property  or  a  certain  kind  of 
business  should  or  should  not  be  socialized. 

While  the  theories  of  standard  Political  Economy  may 
be  divided  into  those  which  are  conservative  and  those 
which  are  more  or  less  liberal,  the  persons  who  accept  the 
standard  doctrines  can  not  be  so  classified  with  any  ap- 
proach to  accuracy.  The  reason  of  this  is  that  standard 
Political  Economy  furnishes  no  central  truth  by  which  its 


26  BISOCIALISM— ECONOMICS 

adherents  may  at  all  times  be  guided  and  by  which 
economic  doctrines  may  at  all  times  be  tested.  The  same 
man  is  often  very  conservative  upon  one  question  and 
liberal  almost  to  radicalism  upon  another,  so  that  the 
classification  of  conservative  and  liberal  must  be  applied 
to  doctrines  rather  than  to  individuals. 

The  advocates  of  systemic  socialism  are  divided  into 
two  classes,  and  by  a  clear  line  of  demarcation.  One  fac- 
tion of  this  school  is  in  favor  of  the  socialization  of  all 
forms  of  property  in  so  far  as  they  may  be  used  in  eco- 
nomic production  and  distribution.  For  this  reason  we 
shall  call  them  omnisocialists  and  their  doctrines  omni- 
socialism.*  Like  the  standard  economists,  they  make  no 
distinction  between  natural  bounties  and  the  products  of 
labor.  But  unlike  the  standard  economists,  they  would, 
in  the  first  instance,  socialize  them  both.  Nothing  would 
be  individualized  under  a  regime  of  omnisocialism  until 
it  had  passed  through  the  hands  and  ownership  of  the 
State  and  had  reached  the  hands  of  its  final  consumer. 

Under  this  form  of  socialism  there  would  be  a  collective 
ownership  of  all  the  means  of  production  and  distribution. 
This  would  involve  the  collective  ownership  of  all  land 
used  productively  and  all  capital.  There  would  be  no 
production  whatever  on  private  account  or  with  private 
means  of  any  kind.  There  would  be  no  market — no  buy- 
ing or  selling  between  individuals — and  no  money.  There 
would  be  no  lending  of  capital  nor  payment  of  interest. 
The  State  would  be  the  only  employer  in  productive  or 
distributive  enterprises.    Payment  would  be  made  in  social 

*  Omni,  from  Latin  omnis,  all. 


OF  CONFLICTING  THEORIES  27 

labor-time  checks,  and  prices  would  be  put  upon  goods 
in  the  public  storehouse  according  to  the  social  labor 
necessary  for  their  production.  As  between  the  State  and 
the  citizen  labor-time  checks  would  be  the  only  medium 
of  exchange.  As  between  individuals  there  would  be  no 
medium  of  exchange  and  no  use  for  any.  There  would 
be  no  chance  for  the  making  of  a  profit  by  the  individual, 
and  to  the  omnisocialist  this  is  the  great  desideratum. 
The  private  ownership  of  capital  and  the  making  of  private 
profits  are  two  of  the  things  most  condemned  by  socialists 
of  this  type.  They  would  eliminate  from  social  life  all 
forms  of  commercial  comj3etition,  for  it  is  to  competition 
that  they  attribute  the  great  evils  of  modern  life,  and 
especially  the  spoliation  of  the  laborer  of  all  of  his  product 
except  a  bare  living  according  to  the  accepted  standard 
at  any  given  time.  For  a  bare  living,  they  claim,  is  all 
that  the  laborer  receives  in  present  conditions,  and  he 
must  constantly  struggle  against  the  tendencies  of  the 
existing  system  in  order  to  get  even  his  living  and  to 
maintain  its  standard. 

The  underlying  principle  of  omnisocialism  with  refer- 
ence to  production  is  sufficiently  stated  in  its  demand  for 
the  collective  ownership  of  all  means  of  production  and 
distribution.  Dr.  Schaflle  has  called  this  demand  the 
"quintessence  of  socialism."  Upon  the  question  of  the 
collective  ownership  of  all  the  means  of  distribution  omni- 
socialists  agree.  But  as  to  the  principle  which  should 
govern  distribution  by  the  State  of  the  collective  product, 
omnisocialists  are  divided  into  three  classes,  each  of  which 
is  distinguished  by  its  formula  concerning  the  rightful 


28  BISOCIALISM— ECONOMICS 

distributive  share  of  the  individual  worker.  The  formula 
concerning  the  contribution  of  each  worker  to  the  State  is 
the  same  for  all;  they  are  all  to  contribute  according  to 
their  ability.  The  first  class,  which  we  may  designate 
as  the  Christian  socialists,  use  the  following  formula: 

From  each  according  to  his  ability;  to  each  accord- 
ing to  his  needs. 

The  second  class,  which  we  may  designate  as  the  Bel- 
lamy socialists,  use  this  formula: 

From  each  according  to  his  ability;  to  all  equally. 

The  third  class,  known  as  the  Marxian  socialists,  present 
the  following: 

From  each  according  to  his  ability;  to  each  according 
to  his  deeds. 

According  to  some  writers  of  the  standard  school  the 
formula  of  the  Marxian  socialists  is  ciso  the  formula 
which  governs  distribution  in  present  conditions.  It  is 
maintained  by  them  that  under  our  much  berated  competi- 
tive system  men  share  in  the  product  according  to  the 
efficacy  of  their  respective  efforts.  But  this  the  socialist 
denies.  He  maintains  that,  however  it  may  be  in  theory, 
in  practice  the  distributive  process  under  the  present  sys- 
tem is  a  mere  substitution  of  legal  power  for  the  physical 
force  of  ancient  times  in  the  appropriation  by  some  of  the 
earnings  of  others,  and  that  both  the  ancient  and  modern 
regimes  conform  to  the  plan  described  in  Wordsworth's 
Rob  Roy's  Grave: 

"For  why?    Because  the  good  old  rule 
Sufficeth  them;   the  simple  plan, 
That  they  should  take  who  have  the  power, 
And  they  should  keep  who  can." 


OF  CONFLICTING  THEORIES  29 

There  is  not  so  much  difference  between  the  ideals  of 
the  Marxian  and  the  Bellamy  socialists  as  their  formulas 
would  indicate.  The  principles  of  Marxian  socialism, 
while  gauging  individual  rewards  by  individual  deeds, 
would  tend,  so  it  is  said,  to  induce  all  men  to  put  forth 
substantially  the  same  effort,  measured  in  labor-time,  and 
thus  to  realize  substantial  equality  of  reward. 

Opposed  to  the  omniaocialists  are  those  socialists  who 
would  limit  the  State  to  the  socialization  of  but  two 
things,  viz.,  natural  opportunities — ^represented  by  ground 
values — and  public  utilities.  These  persons  we  shall  call 
bisocialists,  and  their  doctrine  bisocialism.*  They  make 
a  positive  distinction  between  things  which  are  the  gifts 
of  nature  and  things  which  are  the  products  of  man's 
mental  and  physical  exertion.  This  distinction  is  of  vital 
importance  to  their  theory.  They  contend  that  what  a 
man  creates  is  rightfully  his  own  as  against  the  world. 
But  that  natural  opportunities  are  the  bounties  of  nature 
to  all  men  and  can  not  rightfully  be  made  the  private  prop- 
erty of  some  men  to  the  exclusion  of  all  others,  except  upon 
the  annual  payment  into  the  public  treasury  of  the  differ- 
ential value  of  such  natural  opportunities.  This  plan 
would  allow  private  possession  and  exclusive  use  of  natural 
opportunities  in  the  same  manner  and  by  the  same  legal 
titles  as  under  the  present  order;  and  yet  such  natural 
opportunities  would  be  effectively  socialized  by  the  sociali- 
zation of  their  differential  rental  values.  The  socialization 
of  these  values  would  supply  the  State  with  revenue,  so 


*BI,  from  Latin  bis.  twice;   used  in  English  without  the 
s,  two. 


30  BISOCIALISM— ECONOMICS 

that  all  forms  of  taxation  upon  the  products  of  labor — 
upon  energy  and  thrift — would  be  abolished^,  leaving  to 
the  producer  his  entire  product  so  far  as  it  is  distinctively 
the  result  of  his  effort,  to  do  with  as  he  may  see  fit. 

The  bisocialist  is  a  thorough  going  socialist  as  far  as  he 
goes;  but  he  limits  his  socialism  to  the  complete  socializa- 
tion of  natural  opportunities  and  public  utilities;  as  to 
all  labor  products  he  is  the  strictest  of  individualists.  He 
denies  the  right  of  the  State  to  take  from  him  any  part 
of  his  labor  values  in  taxation;  or  at  least  until  the 
differential  rental  values  of  all  natural  opportunities  and 
all  public  utilities  (if  privately  owned)  have  been  turned 
into  the  public  treasury  and  exhausted.  He  also  denies 
the  claim  of  the  omnisocialist  that  present  evils  are  the 
result  of  competition.  He  contends  that  these  evils  result 
not  from  competition,  but  from  a  denial  of  free  competi- 
tion by  the  creation  and  maintenance  of  monopolies, 
franchises  and  other  special  privileges. 

The  bisocialist  maintains  that  although  his  doctrine  is 
a  golden  mean  between  the  established  order  and  omni- 
socialism,  yet  it  is  in  no  sense  a  compromise.  It  has  a 
distinct  and  complete  philosophy  of  its  own.  In  answer 
to  the  question,  What,  if  any  thing,  is  rightfully  the  sub- 
ject of  unqualified  private  property,  the  bisocialist  replies, 
The  products  of  labor.  In  answer  to  the  question,  What, 
if  any  thing,  is  rightfully  the  subject  of  socialization  for 
the  maintenance  of  the  State,  he  replies,  The  differential 
advantages  (as  reflected  in  the  selling  values)  of  all  natural 
opportunities.  Bisocialism  would  retain  the  present  indus- 
trial and  commercial  systems  stripped  of  all  monopolies 


OF  CONFLICTING  THEORIES  31 

and  special  privileges.  It  would  retain  the  use  of  money, 
but  it  has  a  theory  of  the  standard  of  value  and  of  the 
proper  medium  of  exchange  distinctively  its  own.  It 
would  not  abolish  the  payment  of  interest,  but  would 
deprive  the  money  lender  of  all  chance  of  extortion.  It 
would  give  to  all  men  of  whatever  generation  equal  exter- 
nal opportunities,  but  it  would  not  attempt  to  make  men 
equally  strong  or  equally  wise.  It  -would  assure  to  every 
man  a  fair  field  in  industry  and  exchange,  and  with  that 
every  honest  man  should  be  content.  These  are  some  of 
the  things  which  are  claimed  by  its  advocates  in  favor  of 
bisocialism. 

There  is  no  mistaking  the  fact  that  in  the  realm  of 
economic  thought  a  fierce  -battle  is  being  waged.  There 
is  no  concealing  the  fact  that  this  battle  will  soon  leave 
the  field  of  thought  for  the  field  of  action.  There  is  no 
denying  the  fact  that  the  established  order  is  on  trial  at 
the  bar  of  public  opinion,  and  that  this  trial  will  go  on 
until  a  final  judgment  has  been  reached  and  a  rehearing 
has  been  denied.  By  the  agitation  of  the  anarchist,  gov- 
ernment itself  is  arraigned  before  this  bar.  By  the  chal- 
lenge of  the  omnisocialist,  the  institution  of  private 
property  and  the  entire  competitive  system  of  industry 
and  exchange  are  joined  in  one  indictment  and  must  meet 
the  issue  as  best  they  may.  By  the  philosophy  of  the  biso- 
cialist,  private  property  in  natural  opportunities  under  the 
present  tenure,  and  private  property  in  public  utihties 
under  the  present  system  are  put  upon  trial  and  must  make 
defense  or  die. 

Among  the     governmentalists  it  is  not  the  socialiste 


32  BISOCIALISM— ECONOMICS 

alone  who  bring  to  the  bar  of  Justice  in  the  high  court  of 
public  opinion  the  iniquities  of  the  established  order. 
Men  of  high  intellectual  rank  who  have  no  tinge  of  social- 
ism in  their  economic  conceptions  may  be  heard  sounding 
their  notes  of  warning.  There  is  presumably  something 
wrong,  and  fundamentally  wrong,  with  an  economic  con- 
dition which  would  lead  Professor  Thomas  H.  Huxley 
to  say: 

"Even  the  best  of  modern  civilizations  appears  to  me  to 
exhibit  a  condition  of  manlcind  which  neither  embodies  any 
worthy  ideal  nor  even  possesses  the  merit  of  stability.  I  do 
not  hesitate  to  express  the  opinion,  that,  if  there  is  no  hope  of 
a  large  improvement  of  the  condition  of  the  greater  part  of 
the  human  family;  if  it  is  true  that  the  increase  of  knowledge, 
the  winning  of  a  greater  dominion  over  Nature  which  is  its 
consequence,  and  the  wealth  which  follows  upon  the  dominion, 
are  to  make  no  difference  in  the  extent  and  intensity  of  Want, 
with  its  concomitant  physical  and  moral  degradation,  among 
the  masses  of  the  people,  I  should  hail  the  advent  of  some 
kindly  comet  which  should  sweep  the  whole  affair  away."* 

This,  then,  is  the  situation.  We  must  solve  the  economic 
problem.  Before  we  can  do  this,  we  must  ascertain  clearly 
what  it  is  in  its  essence.  We  must  submit  all  economic 
phenomena  to  the  tests  of  scientific  analysis.  Out  of  the 
essential  data  thus  obtained  we  must,  by  a  scientific 
synthesis,  arrive  at  a  solution  which  will  stand  every  test 
and  meet  every  man  with  an  honest,  full  and  open  answer 
to  his  every  question.  Such  a  solution  must  have  the  cer- 
titude of  science,  and  in  order  to  obtain  this  we  must  make 
our  discussion  conform  to  the  scientific  method.    This  we 


*  Nineteenth  Century  Magazine.  May,  1890. 


OF  CONFLICTING  THEORIES  33 

propose  to  do  by  means  of  an  inquiry  comprehensive  in  its 
scope  and  brief  in  its  treatment,  yet,  when  seeking  funda- 
mental principles,  not  neglecting  the  minutest  details.  In 
Part  I  we  shall  define  the  terms  and  deduce  the  laws  that 
are  necessarily  involved  in  all  true  economic  inquiries. 
In  Part  II  we  shall  apply  these  definitions  and  laws,  not 
only  in  determining  the  fundamental  faults  of  the  estab- 
lished order,  but  also  in  elaborating  the  principles  and  the 
working  plan  of  a  complete  remedy  for  all  the  economic 
evils  which  now  beset  us.  If  at  times  the  discussions  of 
Part  I  shall  seem  technical  or  even  tedious,  we  bespeak  the 
patience  and  persistence  of  the  reader  with  full  assurance 
that  the  conclusions  drawn  in  Part  II  will  be  replete  with 
interest  and  will  well  repay  a  careful  perusal  of  the  entire 
subject.  These  discussions  are  of  interest  not  merely  to 
those  whose  ideals  would  lead  them  to  change  the  estab- 
lished order;  they  are  of  the  utmost  practical  importance 
to  people  of  all  classes  and  professions  if  the  established 
order  is  to  continue. 


CHAPTER  III. 

or    UTILITY    AND    DISUTILITY. 

All  that  man  can  do  is  to  reproduce  existing  materials 
under  another  form  which  may  give  them  an  utility  they  did 
not  before  possess,  or  merely  enlarge  one  they  may  have  before 
presented.  So  that,  in  fact,  there  is  a  creation,  not  of  matter, 
but  of  utility.  J.  B.  Say. 

In  order  to  decide  among  the  conflicting  claims  of  the 
governmentalists  it  is  necessary  for  us  first  to  pass  upon 
the  merits  and  demerits  of  the  competitive  system  of  pro- 
duction. This  system  is  an  essential  feature  of  the  estab- 
lished order  and,  as  a  system,  it  would  survive  the  changes 
which  would  follow  the  adoption  of  bisocialism.  Upon  the 
other  hand,  the  advent  of  omnisocialism  necessarily  in- 
volves the  destruction,  root  and  branch,  of  the  competitive 
system. 

This  attack  of  omnisocialism  upon  the  competitive  sys- 
tem as  a  whole  is  the  distinctive  characteristic  of  this 
school  of  governmentalists.  If  their  contention  in  this 
regard  is  sustained,  they  must  necessarily  prevail  not  only 
over  the  standard  economists,  but  over  the  bisocialists  as 
well;  for  the  preservation  of  commerce — the  preservation 
of  the  freedom  of  the  individual  to  buy  and  sell — is  more 
jealously  guarded  and  defended  by  the  bisocialist  than  by 
the  upholder  of  the  established  order.  On  the  other  hand, 
if  the  arraignment  of  the  competitive  system,  as  a  system, 
can  not  be  maintained,  omnisocialism  is  without  a  rcdson 

34 


OF  UTILITY  AND  DISUTILITY  So 

d'etre.  It  must  prevail  absolutely  or  it  must  fall  com- 
pletely upon  the  determination  in  the  minds  of  the  people 
of  this  one  issue. 

Short  of  the  adoption  of  omnisocialism  as  a  system,  the 
only  fundamental  contest  among  governmentalists  is  be- 
tween the  established  order  and  bisocialism.  In  advance  of 
the  final  decision  of  the  people  as  to  omnisocialism  must 
come  the  verdict  of  Economic  Science  concerning  the  com- 
petitive system. 

The  salient  feature  of  the  competitive  system  is  the 
market.  It  is  here  that  competition  is  manifested,  and 
from  the  market  the  good  or  evil  of  the  competitive  system 
must  emerge.  Within  the  market  (using  the  word  in  its 
widest  sense)  the  most  salient  features  are  those  of  value 
and  cost.  In  this  chapter  and  in  the  chapters  next  follow- 
ing, therefore,  we  shall  investigate  with  great  care  and 
in  some  detail  those  economic  phenomena  which  have  to 
do  with  the  processes  of  the  market  and  with  the  origin 
and  essential  features  of  value  and  cost. 

The  complexities  of  modern  industry  and  exchange, 
when  reduced  to  their  simplest  forms,  are  found  to  rest 
upon  those  simple  laws  of  nature  which  govern  the  efforts 
of  the  individual  man  to  satisfy  his  desires.  In  order  cor- 
rectly to  apprehend  those  complexities  it  is  necessary  for 
us  to  recognize  certain  attributes  common  to  all  men,  and 
certain  natural  laws  which  tend  to  govern  the  individual 
man  in  his  attempts  to  satisfy  his  desires. 

A  Desire  is  the  conscious  recognition  of  a  want  or  a 
need. 

Man  is  a  being  possessed  of  unlimited  actual  or  potential 


36  BISOCIALISM— ECONOMICS 

desires;  this  all  experience  proves.  Many  writers  have 
dwelt  upon  this  fact  and  have  pointed  out  that  while  all 
other  animals  have  the  same  wants  from  age  to  age,  man's 
wants  increase  with  every  advance  of  civilization.  The 
beaver,  for  instance,  builds  for  himself  a  rude  hut  and 
constructs  a  dam  for  its  protection.  Compared  with  the 
huts  built  by  primitive  man,  those  of  the  beaver  show  the 
exercise  of  sagacity  in  location  and  construction  greater, 
it  may  be,  than  that  of  man.  But  the  wants  of  the  beaver 
are  fixed  and  unchangeable.  Xo  beaver  ever  was  born 
that  evolved  a  desire  for  a  better  or  different  habitation 
than  the  house  provided  by  beaver  Adam;  no  beaver  ever 
evolved  a  desire  for  better  or  different  food  than  that  com- 
monly desired  by  his  kind.  This  trait  the  beaver  possesses 
in  common  with  all  other  animals  except  man. 

Although  certain  domestic  animals  individually  acquire 
tastes  when  pampered  and  fed  by  man,  the  lower  animals, 
as  a  class  and  of  their  own  volition,  never  progress  either 
in  the  kind  or  number  of  their  wants,  or  in  the  means  of 
satisfying  them.  On  the  other  hand  the  physical  desires  of 
man,  both  in  kind  and  number,  increase  indefinitely. 
Although  he  may  for  generations  inhabit  rude  huts,  the 
power  is  ever  within  him 

"To  hew  the  shaft  and  lay  the  architrave. 
And  spread  the  roof  above  them  " 

with'  more  perfect  design  and  ever  increasing  execution 
until  he  dwells  in  palaces. 

As  with  shelter,  so  with  food.  Man's  appetite  changes 
Insomuch  that  what  he  once  prized  he  now  abhors,  and 
things  which  he  once  looked  upon  as  nauseous  or  poisonous 


OF  UTILITY  AND  DISUTILITY  37 

he  now  relishes  as  delicacies.  This  is  not  all.  With  man 
the  quantity  of  food  desired  is  limited;  but  its  quality  has 
no  assignable  limit.  When  he  has  satisfied  one  desire,  he 
has  within  him  a  thousand  others  waiting  only  for  a  cir- 
cumstance to  call  them  forth.  His  physical  wants,  actual 
and  potential,  are  well  nigh  infinite  in  number,  and  the 
means  of  satisfying  them  increase  from  year  to  year  and 
age  to  age.  We  have  only  to  consider  the  myriads  of 
articles  of  commerce  and  the  ever  increasing  facility  with 
which  they  are  made  and  transported  to  realize  that  even 
with  reference  to  the  physical  wants  man,  and  man  alone, 
is  voluntarily  and  persistently  a  progressive  animal. 

Superimposed  upon  the  desire  to  eat,  to  drink,  and  to 
dress,  there  is  in  man  the  desire  to  know;  like  the  desires 
of  his  physical  nature,  his  intellectual  desires  are  unlim- 
ited in  number,  and  manifest  themselves  progressively  as 
the  means  of  satisfying  them  increase.  At  first  his  means 
of  observation  are  limited;  his  opportunities  to  know  are 
meager.  Gradually  he  learns  to  put  facts  into  such  rela- 
tions that  other  facts  are  derived  from  them  and  impressed 
■upon  his  consciousness  in  addition  to  those  perceived  di- 
rectly by  the  senses.  Finally,  with  more  favorable  environ- 
ment and  with  increased  knowledge,  he  seeks  to  solve  the 
problems  of  matter,  of  force,  of  body,  of  soul,  of  space, 
of  time,  of  eternity.  It  would  almost  seem  that,  with 
the  fullest  freedom  of  inquiry  and  the  widest  range  of 
opportunity,  none  of  these  things  is  beyond  his  powers. 
Yet  not  less  true  and  important  is  the  fact  that  the  means 
for  satisfying  all  these  desires  are  finite  and  are  not  com- 
mensurate with  the  desires  themselves. 


38  BISOCIALISM— ECONOMICS 

Man's  ability  to  satisfy  his  desires  is  limited  by  his  own 
powers  of  body  and  mind.  Nature  has  furnished  him 
with  powers  of  action  and  of  endurance,  but  upon  both 
of  these  is  placed  a  limit  beyond  which  he  can  not  go. 
Nature  has  also  furnished  him  a  field  upon  which  to  exert 
his  powers,  but  the  possibilities  of  this  field  are  finite. 
Although  this  fact  does  not  justify  that  distorted  and  exag- 
gerated doctrine  based  upon  it,  known  as  Malthusianism, 
yet  it  is  true  that  it  is  man's  attempt  to  satisfy  his  unlim- 
ited desires  with  his  limited  powers  and  environment  that 
furnishes  a  basis  for  Economic  Science.  This  science, 
properly  understood,  will  enable  man  to  develop  his  powers 
and  to  put  himself  into  the  best  possible  relations  with 
his  physical  and  social  en\dronments,  and  so  reach  the 
highest  possible  satisfaction  of  desire. 

The  expenditure  of  effort  in  the  satisfaction  of  desire 
is  not  necessarily  and  always  irksome  to  man.  Up  to  a 
certain  point  exertion  may  give  pleasure,  while  beyond 
such  point  it  may  become  more  and  more  irksome.  Again, 
up  to  a  certain  point  a  desire  may  be  satisfied  by  the  spon- 
taneous bounty  of  nature  without  the  necessity  of  any 
exertion  worthy  of  serious  consideration;  while  beyond 
that  point  an  exertion  irksome  in  its  nature  may  be  re- 
quired. Thus,  in  summer  a  man  may  partially  subsist 
upon  wild  fruits  with  but  a  slight  disutility  of  gathering. 
To  this  disutility  he  is  practically  indifferent.  But  if  he 
travels  far  to  secure  such  fruits,  or  performs  the  toil  nec- 
essary to  preserve  and  store  them  for  future  use,  the  disu- 
tility affects  him  to  an  appreciable  degree.  He  recognizes 
the  irksomeness  of  thp  necessary  travel  a^  toil  to  th^  extent 


OF  UTILITY  AND  DISUTILITY  39 

tlu'.t  he  i.<  put  upon  choice  whether  or  not  he  will  make  the 
necessary  exertion. 

It  is  not  necessary  for  us  fully  to  analyze  the  different 
powers  of  man,  nor  to  distinguish  between  his  physical 
and  mental  powers.  All  powers  of  man  which  are  irk- 
somely exerted  for  the  satisfaction  of  desire  constitute 
what  we  shall  call  labor-power. 

Labor-Power  is  the  physical  or  mental  power  of  man 
irksomely  exerted  for  the  satisfaction  of  desire. 

This  power  is  exerted  in  two  ways — in  the  production 
of  immediate  and  direct  satisfactions  without  any  tangible 
result,  as  in  the  case  of  the  services  of  all  public  officers, 
public  speakers,  opera  singers,  actors,  teachers,  preachers, 
lawyers,  body  servants,  waiters,  ushers,  and  many  others; 
and  in  the  production  with  tangible  result  of  future  and 
indirect  satisfactions,  as  in  the  case  of  the  labor  of  all 
artisans,  mechanics,  farmers — in  short,  of  all  who  exei't 
their  powers  upon  their  physical  environment  for  the  pro- 
duction of  material  forms  which  are  afterwards  consumed 
in  the  satisfaction  of  desire. 

Labor-power  exerted  in  the  first  way  is  called  Service; 
in  the  second,  Labor. 

When  service  is  rendered  for  the  benefit  of  the  public 
and  at  its  expense,  it  is  public  service;  when  rendered 
for  the  benefit  of  private  persons  and  at  their  expense,  it 
is  private  service.  The  question  of  public  and  private 
service  belongs  to  our  inquiry,  but  service  does  not  con- 
stitute the  primary  mode  of  exerting  the  powers  of  man 
for  the   satisfaction   of  desire.     Primarily,  man  satisfies 


40  BISOCIALISM— ECONOMICS 

liis  desires  through  the  exertion  of  labor-power  upon  his 
physical  environment. 

Although  the  mechanism  of  modern  industry  may  seem 
to  be  very  complex  and  its  methods  extremely  intricate,  yet, 
at  the  bottom,  the  mechanical  problems  are  exceedingly 
simple.  The  exertion  of  labor-power  upon  external  objects 
can  produce  changes  of  two  kinds  only;  it  may  change  the 
form  of  the  objects;  it  may  change  their  position;  or  it 
may  change  both.  If  any  such  change  creates  or  increases 
in  such  material  substances  a  fitness  to  administer  to 
human  wants,  or,  what  is  the  same  thing,  to  satisfy  human 
desires,  then  such  substances  are  brought  within  the  field 
of  our  inquiry;   otherwise,  not. 

The  exertion  of  labor-power,  therefore,  may  bring  about 
such  a  change  of  the  form  or  position  of  a  part  of  the 
physical  environment  as  to  fit  it  to  satisfy  or  better  to  sat- 
isfy a  human  desire.  This  fitness  to  satisfy  desire  is  called 
utility,  and  the  material  substance  to  which  this  fitness 
is  given  by  labor-power  may  be  called  a  labor-form. 

Utility  is  fitness  to  satisfy  desire. 

An  object  in  its  natural  state  may  possess  utility,  and 
this  natural  utility  may  be  retained  even  after  a  new  and 
distinctive  utility  has  been  given  to  the  object  by  labor- 
power.  Thus,  the  wood  of  an  oak  tree  has  natural  utility 
for  the  purposes  of  fuel;  and  this  utility  is  retained  after 
the  wood  has  been  converted  into  chairs  or  other  manu- 
factured articles.  But  the  utility  of  the  wood  as  fuel  is 
no  longer  the  distinctive  utility.  The  present  distinctive 
utility  is  that  of  the  manufactured  article.  In  any  case 
in  which  the  utility  added  by  labor-power  is  distinguish- 


OF  UTILITY  AND  DISUTILITY  41 

able  it  is  ahvays  easy  to  determine  whether  the  present  dis- 
tinctive utility  of  an  object  is  natural,  or  whether  it  is 
the  result  of  labor-power.  In  those  cases  where  the  added 
utility  is  so  slight  as  not  to  be  readily  distinguishable  the 
change  has  no  economic  significance. 

A  Labor-Form  is  any  material  substance,  great  or  small, 
so  circumstanced  that  its  present  distinctive  utility  is  the 
result  of  labor-power. 

The  necessary  expenditure  of  effort  beyond  a  point  soon 
reached  is  irksome  to  man,  and  produces  immediate  fatigue 
as  well  as  immediate  or  ultimate  enjoyment.  Labor-power 
has  its  irksomeness  as  well  as  its  utility,  the  former  can- 
celing or  neutralizing  the  latter  to  a  certain  extent. 
Within  certain  limits,  which  we  shall  hereafter  discover 
and  define,  both  irksomeness  and  utility  are  capable  of 
measurement.  Not  only  that,  but  they  may  be  measured 
by  the  same  labor-form  used  as  a  unit,  and  therefore  the 
one  may  be  directly  compared  with  the  other.  Irksomeness 
and  utility  are  not  correlatives,  however,  but  opposites. 
In  comparing  them  the  one  is  set  against  the  other.  The 
one  is  negative,  the  other  positive. 

It  is  true  that  after  a  thing  has  once  been  attained  the 
fact  that  it  required  an  effort  to  secure  it  sometimes  gives 
added  zest  to  its  enjoynuent.  But  this  fact  does  not  con- 
vert irksomeness  into  utility;  nor  is  it  the  rule  that  the 
more  irksomeness  the  more  utility;  nor  do  these  exception- 
al cases  affect  the  market  as  a  whole.  In  anticipation  of 
the  market  men  who  desire  to  sell  weigh  the  irksomeness 
of  production  against  the  utility  of  market  price,  and 
unless  the  comparison  is  favorable  to  utility  they  do  not, 


42  BISOCIALISM— ECONOMICS 

in  normal  conditions,  enter  the  market  at  all;  and  men 
who  desire  to  buy  weigh  the  irksomeness  which  has  attend- 
ed the  attainment  of  the  price  against  the  utility  of  the 
thing  to  be  purchased,  and  act  accordingly.  Each  man 
seeks  to  satisfy  his  desires  with  the  least  irksomeness, 
restraint  or  hindrance. 

If  all  desires  could  be  satisfied  without  the  expenditure 
of  effort  and  without  any  restraint  or  hindrance,  all  utility 
would  be  unalloyed.  But  to  the  extent  that  irksome  effort 
is  required,  directly  or  indirectly,  in  the  satisfaction  of 
desire,  and  to  the  extent  that  enjoyment  is  restrained  or 
hindered,  just  to  that  extent  is  utility  alloyed  and  thereby 
canceled.  It  is  immaterial,  in  this  view,  whether  the  irk- 
someness, restraint  or  hindrance  precedes  the  enjoyment 
or  is  concurrent  therewith.  Taking  into  consideration  the 
entire  period  covered  by  both  acquisition  and  enjoyment, 
any  irksomeness,  restraint,  or  hindrance  which  attends  the 
attainment,  or  diminishes  the  enjo}Tnent  of  utility,  nega- 
tives or  alloys  such  utility  and  constitutes  what  we  shall 
call  disutility. 

Disutility  is  any  irksomeness,  restraint,  or  hindrance, 
however  caused,  which  attends  the  attainment  or  other- 
wise alloys  the  enjoyment  of  utility. 

A  man  produces  a  labor-form,  for  instance  a  coat,  and 
it  has  for  him  a  certain  amount  of  utility.  A  certain 
degree  of  disutility  attends  its  production,  however,  so  that 
only  a  part  of  its  utility  gives  to  him  unalloyed  satisfac- 
tion of  desire.  After  he  has  completed  the  coat  any  tax 
upon  it  or  restriction  upon  its  transportation,  sale,  or  use 


OF  UTILITY  AND  DISUTILITY  4o 

practically  increases  the  disutility  of  its  acquisition  and,  to 
Ihat  extent,  alloys  the  enjoyment  of  its  utility. 

The  i)ractical  problem  of  the  individual  is  to  obtain  a 
maxinnim  of  utility  with  a  minimum  of  disutility.  In 
(h)iiig  so  he  must  compare  and  measure  various  utilities 
and  disutilities. 

Two  tilings  may  be  compared  when  it  can  be  said  of 
them  either  that  they  are  equal,  or  that  one  is  greater 
t  han  the  other.  Measurement  is  a  step  beyond  mere  com- 
parison. In  order  to  measure  a  thing  three  things  are  nec- 
essary; a  point  from  which  to  measure,  a  point  to  which  to 
measure,  and  a  unit  of  measurement.  It  is  our  present 
])urpose  to  consider  those  conditions  under  which  various 
utilities  and  disutilities  may  be  compared  and  measured. 

First,  then,  let  us  establish  a  common  point  of  view  for 
the  purposes  of  comparison.  Up  to  a  certain  point,  as  we 
liave  seen,  utility  may  be  spontaneous  or  practically  so, 
and  in  all  cases  of  productive  industry  nature  spontane- 
ously does  a  part  by  furnishing  the  raw  materials.  But 
at  the  point  where  irksomeness  begins  spontaneity  ends. 
For  convenience  we  shall  call  the  point  where  spontaneity 
begins  the  point  of  spontaneity,  and  the  point  where  dis- 
utility begins  the  point  of  disutility. 

The  Point  of  Spontaneity  is  the  point  where  the  spon- 
taneity of  nature  begins. 

The  Point  of  Disutility  is  the  point  where  the  sponta- 
neity of  nature  ends  and  the  disutility  of  acquisition  be- 
gins. 

Man  does  not  care  either  to  compare  or  to  measure  utili- 
ties which  are  spontaneous.     But  as  soon  as  irksomeness 


44  BISOCIALISM— ECONOMICS 

emerges  his  interest  is  aroused,  and  his  comparisons  be- 
gin. The  point  of  disutility  becomes  the  point  from  which 
he  compares  all  utilities  and  disutilities.  It  is  the  economic 
starting  point. 

Economics  does  not  deal  with  spontaneities.  It  is  only 
when  the  procuring  of  utilities  is  onerous  that  man  puts 
any  estimate  upon  them.  The  first  distinction,  therefore, 
which  we  must  make  with  reference  to  utilities  is  to  sepa- 
rate those  which  do  not  require  the  exertion  of  labor-power 
for  their  acquisition  and  enjoyment  from  those  which  do 
require  such  exertion.  This  separation  is  based  upon  the 
distinction  between  spontaneous  and  onerous  utility. 

Spontaneous  Utility  is  utility  which  does  not  require  the 
exertion  of  labor-power  for  its  acquisition  and  enjoyment. 

Onerous  Utility  is  utility  which  requires  the  exertion  of 
labor-power  for  its  acquisition  and  enjoyment. 

Onerous  utility  begins  at  the  point  of  disutility.  Dis- 
utility begins  at  the  same  point.  They  extend  upward  to- 
gether, the  disutility  neutralizing  the  utility  up  to  a  cer- 
tain point  at  which  the  disutility  ceases  and  the  utility 
alone  extends  indefinitely  upwards.  To  illustrate:  A  man 
exerts  a  certain  amount  of  labor-power  in  making  a  pair 
of  shoes.  Disutility  begins  with  the  labor.  A  new  utility 
also  begins  with  the  labor,  and  each  successive  moment 
adds  to  the  distinctive  utility  which  culminates  in  a  pair 
of  shoes.  "When  he  has  cut  out  only  the  soles  there  is 
distinctive  utility  accompanied  by  a  perceptible  disutility. 
The  disutility  ends  with  the  completion  of  the  shoes,  while 
the  utility  then  becomes  complete  and  persists  until  the 
shoes  are  worn  out. 


OF  UTILITY  AND  DISUTILITY  45 

The  point  at  which  the  disutility  ends  and  the  positive 
utility  of  the  shoes  begins  we  shall  call  the  point  of  positive 
utility.  It  marks  the  point  of  separation  between  dis- 
utility— the  negative  of  utility — and  positive  utility.  It  is 
the  economic  zero  point. 

The  Point  of  Positive  Utility  is  the  point  where  the  dis- 
utility of  acquisition  ends  and  positive  utility  begins. 

We  must  now  discover  a  unit  of  measurement  for  both 
utility  and  disutility.  Every  measuring  unit  must  be  of 
the  same  nature  as  the  thing  measured.  Utility  can  be 
pleasured  only  by  a  standard  of  utility,  and  disutility  by  a 
gtandard  of  disutility.  But  since  every  labor-form  is  the 
concrete  expression  of  both  utility  and  disutility,  it  is 
possible  for  the  same  labor-form  to  furnish  a  unit,  or 
standard,  for  the  common  measurement  of  both  of  these 
intangible  qualities.  For  such  a  labor-form,  therefore,  we 
shall  seek. 


CHAPTER  IV. 

OF   THE   MARGINAL   LABOK-FORM. 

First  recognize  what  is  true;  we  shall  then  discern  what 
is  false,  and  properly  never  till  then.  Thomas  Carlyle. 

The  individual  must  apportion  his  expenditures  among  his 
various  kinds  of  wants  in  such  a  way  that  to  him,  as  nearly 
as  practicable,  each  last  unsatisfied  want  will  weigh  the  same 
in  his  scale  of  desires  as  every  other.  Richard  T.  Ely. 

Let  us  first  consider  man  in  his  attempt  to  satisfy,  in  a 
primitive  state,  the  most  pressing  of  all  his  desires — his 
desire  for  food.  By  putting  forth  a  certain  amiount  of 
effort  he  is  able  to  satisfy  his  present  needs,  say,  by  gath- 
ering chestnuts.  At  the  beginning  of  his  effort  his  hunger 
is  great  and  chestnuts  have  for  him  a  correspondingly 
great  utility.  Compared  with  this  utility  the  disutility  of 
his  exertion  is  slight;  he  scarcely  notices  it.  As  his  hun- 
ger becomes  appeased  the  present  utility  of  chestnuts 
diminishes,  and  relatively,  though  not  absolutely,  the  dis- 
utility of  his  exertion  increases.  Finally  he  reaches  a  state 
of  satisfaction  in  which  the  present  utility  of  chestnuts  is 
no  greater  than  their  disutility  and  he  ceases  his  efforts. 
The  utility  has  become  to  him  indifferent.  It  may  be  said 
there  is  a  time  when  a  chestnut  has  for  him  just  enough 
utility  to  cause  him  to  put  forth  the  necessary  effort  to 
acquire  it;  after  that  the  disutility  turns  the  scale.  How 
much  utility  the  first  chestnut  secured  by  him  possessed 
we  can  not  tell,  nor  does  it  matter.     But  that  the  last 

46 


OF  THE  MARGINAL  LABOR-FORM  47 

chestnut  possesses  for  him  but  one  unit  of  positive  utility 
we  know.  For  if  it  possessed  two  units,  he  would  exert 
himself  to  procure  another  chestnut;  and  if  it  possessed 
less  than  one  unit,  he  would  not  exert  himself  to  obtain 
this  one.  The  positive  utility  of  the  last  chestnut,  there- 
fore, furnishes  him  with  a  unit  of  comparison  for  utility. 

In  like  manner  it  may  be  shown  that  the  last  chestnut 
has  but  one  unit  of  disutility,  and  that  its  disutility  is 
consequently  the  natural  unit  of  comparison  for  all  dis- 
utility to  him  at  the  time  and  place  in  question.  For  if 
it  had  not  one  unit  of  disutility,  its  utility  would  be  spon- 
taneous, as  is  the  utility  of  the  air  and  of  sunshine  in 
ordinary  circumstances,  and  no  exertion  at  all  would  be 
required  to  secure  it;  and  if  it  possessed  two  units  of 
disutility,  its  disutility  would  cancel  its  one  unit  of  posi- 
tive utility,  and  its  utility  would  become  indifferent. 

Intensity  of  desire  is  thus  seen  to  be  the  determining 
element  of  onerous  utility.  Whatever  intensifies  desire 
increases  the  utility  of  anything  which  has  fitness  to  sat- 
isfy such  desire.  We  shall  now  examine  those  factors 
which  influence  intensity  of  desire. 

We  have  considered  the  chestnuts  with  reference  to 
present  utility  only.  Man  does  not,  like  some  of  the 
lower  animals,  hoard  food  for  future  use  in  obedience 
to  instinct.  When  he  hoards  at  all  it  is  in  obedience  to 
an  attribute  of  the  mind  of  man  which  is  absent  in  the 
lower  animals — the  attribute  of  forethought.  The  distinc- 
tion will  appear  when  we  consider  that  among  the  lower 
animals  the  hoarding  instinct  is  present  in  all  animals 
of  a  given  species  in  equal  degree.     Age  after  age  bees 


48  BISOCIALISM— ECONOMICS 

have  stored  up  honey  to  the  same  extent  and  in  the  same 
way.  The  same  condition  is  substantially  true  of  all 
hoarding  animals  except  man.  "With  him  none  of  these 
things  is  true.  Some  men  appear  to  be  void  of  any  ten- 
dency to  hoard,  while  others  possess  it  to  an  abnormal 
degree.  From  that  primitive  hoarding  which  was  con- 
fined to  the  most  pressing  wants  and  the  shortest  pos- 
sible anticipation  of  the  future,  men  have  progressed  so 
as  to  anticipate  and  provide  for  manifold  wants  in  years 
and  decades  yet  to  come.  Anticipation  of  the  future  and 
provision  for  it  furnish  one  of  the  best  indexes  of  the 
state  of  civilization  attained  by  a  particular  man,  nation 
or  race. 

Let  us  recur  to  the  man  and  the  chestnuts.  It  may  be 
that  after  his  present  want  of  food  is  satisfied,  he  will 
anticipate  the  next  meal  or  the  next  day,  and  continue 
to  gather  chestnuts.  But  the  utility  of  the  chestnuts  to 
be  eaten  to-morrow  is  less  than  of  those  to  be  eaten  at 
once.  Man  places  a  lower  estimate  upon  future  than  upon 
present  satisfaction  of  desire,  and  the  more  remote  the 
time  of  enjoyment  the  lower  the  estimate,  other  things 
being  equal,  until  he  ceases  to  esteem  at  all  satisfactions 
to  be  enjoyed  beyond  a  certain  time,  and  will  make  no 
present  effort  to  anticipate  them.  There  is  a  "perspective 
of  utility,  diminishing  with  remoteness  of  time."  A  man 
may  be  so  situated  that  for  to-day's  dinner  of  chestnuts 
he  will  put  forth  a  certain  effort.  In  anticipation  of  to- 
morrow's wants  he  will  put  forth  some  effort,  but  not  so 
much  as  for  to-day's;  and  for  day  after  to-morrow's  wants 
he  will  make  no  present  effort  at  all. 


OF  THE  MARGINAL  LABOR-FORM  49 

Let  us  now  assume  that  this  man  has  advanced  in 
civilization  until  he  has  acquired  enough  forethought  and 
energy  to  provide  chestnuts  in  advance  for  several  days — 
say  a  pint  for  each  day  for  a  week.  Prohably  he  can  not 
point  to  any  particular  pint  and  say  it  has  cost  him  more 
effort  than  the  others.  Ordinarily  the  effort  to  secure  the 
several  pints  will  have  been  substantially  the  same;  there- 
fore, they  have  equal  disutilities,  or,  what  is  the  same 
thing,  their  points  of  positive  utility  coincide.  He  esteems 
them  alike.  It  is  impossible  for  him  to  say  that  any 
particular  pint  has  the  greatest,  and  another  the  least 
utility  at  any  given  time,  unless  he  arbitrarily  sets  aside 
a  particular  pint  for  each  particular  day.  But  even  if 
he  does  this,  and  by  some  accident  loses  the  pint  which 
he  has  set  aside  for  the  morrow,  he  will  not  on  that 
account  go  hungry  on  that  day.  He  will  shift  the  loss  to 
the  seventh  day  whether  he  has  so  parceled  the  chestnuts 
out  or  not.  In  this  way  he  will  minimize  his  loss  by 
shifting  it  to  that  pint  of  chestnuts  which  has  for  him 
the  least  present  utility. 

Suppose,  now,  that  the  accident  which  cost  him  this  one 
pint  had  endangered  all  the  others  so  that  the  man  is 
forced  to  put  forth  an  effort  to  save  them.  When  he  has 
saved  the  first  pint  his  zest  for  saving  the  second  is  less, 
although  he  saves  it,  and  so  on  for  the  others,  until  for 
the  last  he  may  make  no  effort,  or  not  sufficient  effort,  and 
it  is  lost.  Consciously  or  unconsciously  the  remoteness  of 
the  satisfaction  was  the  determining  factor  which  governed 
his  efforts. 

From  these  illustrations  wc   may  say  that  time  is  a 


50  BISOCIALISM— ECONOMICS 

factor  of  that  intensity  of  desire  which  affects  positive 
utility.  While  we  may  not  be  able  exactly  to  measure  this 
factor  in  all  cases,  we  know  that  a  labor-form  which  is 
held  for  the  satisfaction  of  a  present  want  has  a  higher 
utility,  other  things  being  equal,  than  one  which  is  held 
for  future  satisfactions;  and  so  far  as  both  present  and 
future  satisfactions  are  concerned,  we  know  that  the  least 
labor-form  which  a  man  will  exert  himself  at  any  given 
time  to  secure,  if  he  has  it  not,  or  to  save,  if  he  has  it, 
has  for  him  but  one  unit  of  utility. 

Let  us  now  change  the  illustration,  and  consider  a  man 
situated,  like  Selkirk,  upon  an  island  in  the  springtime 
and  possessed  of  three  bags  of  corn,  the  remainder  of  hia 
last  year's  crop.  The  bags  contain  equal  amounts  of  com 
of  the  same  quality,  and  were  secured  and  preserved  by 
equal  expenditures  of  effort.  Their  disutilities  are  the 
same,  and  their  points  of  positive  utility  coincide.  In 
considering  their  utilities,  let  us  consider  only  the  pur- 
poses to  which  the  bags  of  corn  are  to  be  devoted. 

"We  will  assume  that  one  bag  is  held  to  supply  him  with 
food  while  planting  and  tending  the  next  crop;  another, 
for  seed  com  for  immediate  planting;  and  the  third,  for 
the  sustenance  of  a  pet  parrot.  If,  now,  an  accident  causes 
the  loss  of  one  bag  of  corn,  the  man  will  not  go  hungry 
himself,  nor  will  he  refrain  from  planting  his  crop  for  his 
own  future  sustenance.  He  will  shift  the  loss  to  the  least 
sensitive  point,  and  deprive  the  parrot  of  cereal  food,  since 
the  parrot's  pangs  of  hunger  are  of  less  moment  to  him 
than  are  his  own,  and  its  company  is  less  to  be  regarded 
than  his  supply  of  food  during  the  bleakness  of  the  coming 


OP  THE  MARGINAL  LABOa-FORM  51 

winter.  And  if  another  accident  causes  him  the  loss  of  a 
second  bag  of  corn,  he  will  consider  his  present  rather  than 
future  wants,  and  plant  no  corn. 

The  particular  choices  which  are  here  attributed  to  the 
man  in  his  attempts  to  shift  the  loss  to  the  least  sensitive 
point  are  not  material  to  our  argument.  In  his  loneliness 
he  might  prefer  the  company  of  the  parrot  to  a  future 
supply  of  corn;  or  he  might  prefer  a  future  supply  of 
corn  to  present  cereal  food.  The  salient  points  are  that  in 
such  a  case  the  three  bags  of  equal  amounts  and  equal 
disutilities  would  have  for  the  man  different  degrees  of 
utility,  so  far  as  the  several  purposes  for  which  he  held 
them  are  concerned;  and  in  case  of  loss  of  part  of  the 
corn  he  would  shift  the  loss  to  that  portion  having  for 
him  the  least  utility  in  all  the  circumstances. 

To  the  factor  of  time  of  satisfaction  we  may  now  add 
that  of  choice  of  satisfactions  in  our  analysis  of  intensity 
of  desire.  We  may  also  say  that  the  laws  governing  these 
factors  are  the  same.  Analysis  in  either  case  carries  us 
back  to  a  labor-form  having  but  one  unit  of  the  particular 
kind  of  utility  involved. 

A  closer  analysis  of  the  illustration  of  the  three  bags  of 
corn  will  show  that  the  conclusions  are  based  upon  the 
hypothesis  that  the  satisfaction  of  the  several  desires 
named  is  dependent  upon  the  existence  of  corn.  In  ordi- 
nary circumstances  this  is  not  true.  Corn  is  not  the 
ciily  article  of  food  available  even  on  an  island.  And  if 
we  introduce  into  our  illustration  not  only  the  fact  that 
the  same  labor-form — corn — will  satisfy  different  desires, 
hut  tbat  other  labor-forms  will  satisfy  each  of  these  do- 


52  BISOCIALISM— ECONOMICS 

sires,  we  shall  notice  a  change  in  the  man's  estimate  of  the 
various  utilities.  If  he  has  at  hand,  or  easily  obtainable, 
some  other  parrot  food,  he  will  all  the  more  readily  shift 
his  loss  to  that  quarter.  If  he  has  no  such  substitute  for 
parrot  food,  but  has  for  his  own  present  food,  he  may 
continue  to  feed  the  parrot  and  go  without  corn  himself. 
This  change  of  relative  utilities,  however,  introduces  no 
new  law.  He  still  shifts  the  loss  to  the  least  utility.  In 
the  analysis  of  the  intensity  of  desire  which  affects  the 
positive  utility  of  labor-forms  the  presence  or  absence  of 
substitutional  forms  enters  as  a  third  factor. 

Lastly,  let  us  note  that  an  increase  in  the  number  of 
bags  of  corn  possessed  by  the  islander  at  the  outset  would 
have  changed  the  whole  situation.  We  assumed  that  with 
three  bags  he  could  satisfy  three  different  desires,  but  that 
the  loss  of  one  bag  necessarily  deprived  him  of  one  of 
these  satisfactions.  If,  however,  with  the  same  desires, 
he  had  possessed  six  bags  of  corn,  the  result  would  have 
been  the  same  as  if  he  had  obtained  three  substitutional 
labor-forms.  The  loss  of  one  bag  would  not  have  embar- 
rassed him  seriously  nor  greatly  increased  his  estimation 
of  the  other  five  bags.  Hence  the  number  of  labor-forms 
in  relation  to  particular  desire  is  a  fourth  factor  affecting 
intensity  of  desire. 

Therefore,  the  point  of  positive  utility  remaining  the 
same,  the  positive  utility  of  a  labor-form  varies  according 
to  the  intensity  of  desire,  and  this  in  turn  varies  accord- 
ing to  the  time  of  satisfaction,  the  number  of  desires 
involved  capable  of  satisfaction  by  the  same  labor-form, 
the  number  of  substitutional  labor-forms,  and  the  number 
of  particular  labor-forms  in  question. 


OF  THE  MARGINAL  LABOR-FORM  53 

So  far  we  have  confined  our  illustrations  to  articles  of 
food,  and  to  food  of  one  kind,  except  in  the  case  of  sub- 
stitutional foods  of  the  same  general  class.  In  the  cases 
considered  we  have  found  both  a  unit  for  the  comparison 
of  utilities — the  least  or  marginal  utility — and  a  starting 
point  from  which  to  institute  comparisons — the  point  of 
disutility.  If  we  consider  the  same  man  in  connection  with 
the  various  kinds  of  food  which  he  may  possess  at  one 
time,  we  shall  find  that  the  same  principles  apply.  There 
will  be  one  article  of  food  which  he  will  esteem  less  than 
the  others,  and  if  necessity  requires  him  to  deprive  him- 
self of  some  one  article  of  food,  he  will  prefer  to  sacrifice 
the  one  which,  if  retained,  would  afford  him  the  least 
satisfaction.  This  article  thus  becomes  the  unit  by  which 
he  compares  the  utilities  of  his  various  articles  of  food, 
and  its  point  of  disutility  becomes  the  point  from  which 
he  judges  them.  And  if  to  food  we  add  articles  which 
furnish  him  clothing,  shelter,  amusement,  etc.,  the  result 
will  be  similar.  There  will  be  one  article  among  them 
which  he, esteems  least  of  all,  and  by  which  and  from'  the 
point  of  disutility  of  which  he  will  compare  and  judge  all 
the  utilities  then  and  there  possessed  or  desired  by  him. 

The  least  utility  which  a  man  at  a  given  time  and 
place  will  strive  to  secure,  if  he  has  it  not,  or  to  save,  if 
he  has  it,  is  to  him  the  marginal  utility;  the  effort  neces- 
sary to  secure  it  is  the  marginal  disutility;  and,  similarly, 
that  labor-form  which  he  will  barely  strive  to  produce,  if 
he  has  it  not,  or  to  save,  if  he  has  it,  is  to  him  the 
marginal  labor-form. 

The  Mar^nal  Labor-Form  of  any  person  is  that  labor- 


54  BISOCIALISM— ECONOMICS 

form  which  has  for  him  but  one  unit  of  positive  utility 
and  but  one  unit  of  disutility. 

The  marginal  labor-form  of  any  man  is  his  natural 
standard  of  comparison  for  all  utilities  and  disutilities. 
But  what  is  the  marginal  labor-form  to  one  man  is  not 
likely  to  be  to  another,  so  much  do  men  differ  in  their 
desires  and  estimates.  This  fact  furnishes  a  basis  for 
barter  and  exchange. 

We  have  already  alluded  to  the  fact  that  some  utilities 
require  no  irksome  effort  on  the  part  of  man  for  their 
production  and  enjoyment,  as  air  and  sunshine  in  ordinary 
circumstances.  They  are  usually  free  to  all  alike  and 
abound  everywhere.  These  we  have  called  spontaneous 
utilities.  Inasmuch  as  they  can  be  appropriated  by  man 
without  labor  they  have  no  bearing  on  economic  questions. 
Plaving  no  unit  of  utility  or  disutility  with  which  to  insti- 
tute a  comparison,  they  are  never  compared  with  indus- 
trial utilities  or  with  each  other.  Man  places  no  estimate 
upon  them.  In  short,  in  order  to  have  any  economic 
significance,  an  object  must  have  disutility  as  well  as 
utility — and  the  latter  must  exceed  the  former.  If  inven- 
tion could  reduce  the  point  of  positive  utility  in  all  cases 
to  the  point  of  disutility,  all  economic  phenomena  would 
cease.  As  it  is,  nearly  all  utility  is  onerous  rather  than 
spontaneous.  Having  divided  all  utility  with  reference  to 
the  means  of  its  attainment  into  spontaneous  and  onerous 
utility,  and  having  excluded  the  former  from  our  consid- 
eration, let  us  seek  to  analyze  onerous  utility. 

In  their  entireties  and  in  some  circumstances  onerous 
utilities  are  not  only  immeasurable  but  incomparable.    If 


OF  THE  MARGINAL   LABOR-FORM  o;") 

a  man's  life  is  seemingly  dependent  upon  the  retention 
by  him  of  a  single  morsel  of  food^  his  only  store,  its 
utility  to  him  is  absolute — it  is  a  matter  of  life  or  death. 
For  the  time  being  he  looks  upon  this  fitness  to  satisfy 
desire  as  all  in  all,  without  relation  to  the  comparative 
fitness  of  any  or  all  other  utilities.  In  such  circumstances 
the  utility  involved  has  no  reference  to  the  market.  But 
in  ordinary  circumstances  the  utility  of  a  morsel  of  food  is 
but  relative,  and  may  freely  be  compared  with  other 
utilities.  All  relative  utilities  may  be  considered  with 
reference  to  the  market. 

Absolute  Utility  is  fitness  to  satisfy  desire  without  refer- 
ence to  the  comparative  fitness  of  any  or  all  other  utilities. 

Relative  Utility  is  fitness  to  satisfy  desire  with  reference 
to  the  comparative  fitness  of  any  or  all  other  utilities. 

Economics  does  not  treat  of  absolute  utilities,  so  that 
these  also  may  be  excluded  from  our  consideration.  Our 
next  step  is  to  analyze  relative  utility. 

With  reference  to  particular  labor-forms  all  men  are 
either  producers  or  consumers.  To  each  of  these  classes 
the  primary  importance  of  a  labor-form  does  not  lie  in  the 
fact  that  it  has  been  made  into  a  particular  shape,  but  in 
the  fact  that  it  possesses  utility.  The  form  which  it 
assumes  under  the  hand  of  man  in  the  process  of  its 
making  is  important  only  because  it  contributes  to  its  use- 
fulness. A  labor-form  has  no  economic  significance  ex- 
cept as  a  concrete  expression  of  utility. 

The  making  of  a  labor-form  in  the  sense  of  giving  to  it 
its  distinctive  form  and  finish  is  not  the  only  thing  which 
contributes   to   its   utilitv.     We  have   already   seen  that 


56  BISOCIALISM— ECONOMICS 

labor-power  may  be  exerted  upon  external  objects  so  asS  to 
produce  changes  not  only  of  form,  but  of  position.  Each 
of  these  changes  may  contribute  to  utility,  and  the  one  as 
much  as  the  other.  A  labor-form  may  be  completed  as  to 
its  form  in  a  factory  upon  the  Atlantic  coast  and  yet  have 
little  utility  until  it  has  been  transported  to  the  Pacific 
coast  to  be  employed  in  some  enterprise  peculiar  to  that 
region.  The  man  who  buys  it  of  the  manufacturer  and 
transports  it  to  the  Western  coast  adds  greatly  to  its  utility 
by  so  doing.  And  if  upon  its  arrival  in  San  Francisco  a 
final  purchaser  is  not  immediately  forthcoming,  the  dealer 
in  such  wares  who  buys  it  of  the  shipper  and  places  it  for 
sale  in  some  convenient  and  conspicuous  place  also  adds 
to  its  utility.  He  brings  it  so  much  nearer  to  the  person 
who  wants  it  for  final  consumption,  and  has  it  ready  for 
use  as  soon  as  it  is  needed  by  such  consumer. 

All  the  men  who  have  added  in  any  way  to  the  utility 
of  a  labor-form,  whether  by  giving  it  its  form,  by  changing 
its  location,  or  by  holding  it  in  readiness  for  the  purchaser 
so  as  to  save  the  time  of  the  latter,  are  producers.  They 
have  all  created  or  increased  its  utility  and  this,  and  not 
mere  manufacture,  is  the  gist  of  production. 

Production  is  the  artificial  creation  or  increase  of  utility. 

After  relative  utility  has  been  created  it  may  be  used 
by  the  producer  as  an  aid  to  still  further  production,  or  it 
may  be  used  by  a  final  consumer  without  reference  to  any 
further  processes  of  production.  The  processes  of  produc- 
tion are  those  of  industry — the  making  and  transporting 
of  labor-forms — and  of  exchange. 

Utility  which  avails  only  the  consumer  we  shall  call 


OF  THE  MARGINAL  LABOR-FORM  57 

ultimate  utility;  while  that  which  avails  only  the  producer 
we  shall  call  intermediate  utility. 

Ultimate  Utility  is  that  form  of  relative  utility  which 
avails  a  consumer  subsequent  to  all  the  processes  of  in- 
dustry and  exchange. 

Intermediate  Utility  is  that  form  of  relative  utility 
which  avails  a  producer  in  some  of  the  processes  of  in- 
dustry or  exchange. 

A  labor-form  may  be  used  in  such  a  manner  that  it 
avails  a  consumer  subsequent  to  all  the  processes  of  in- 
dustry and  exchange,  or  in  such  a  manner  that  it  avails  a 
producer  in  some  of  these  processes.  In  the  former  case 
it  is  a  satisform;  in  the  latter,  a  capital-form. 

A  Satisform  is  a  labor-form  so  circumstanced  that  it 
avails  a  consumer  subsequent  to  all  the  processes  of  in- 
dustry and  exchange. 

A  Capital-Form  is  a  labor-form  so  circumstanced  that  it 
avails  a  producer  in  some  of  the  processes  of  industry  or 
exchange. 

A  satisform  is  distinctively  possessed  of  ultimate  utility; 
a  capital-form,  of  intermediate  utility. 

It  is  the  marginal  satisform  of  every  man  that  furnishes 
him  with  a  marginal  unit  of  utility.  If  a  man  is  possessed 
of  but  one  kind  of  food,  say  corn,  and  no  other  satisforms 
whatever,  then  that  part  of  the  corn  which  is  least  es- 
teemed by  him  furnishes  the  marginal  unit.  If  he  now 
acquires  several  different  kinds  of  food,  some  having  less 
and  some  greater  utility  than  corn,  the  marginal  unit  for 
food  shifts  to  that  portion  of  food  least  esteemed.  And  if 
he  shall  further  acquire  various  satisforms  besides  food,  of 


58  BISOCIALISM— ECONOMICS 

different  relative  utility,  the  marginal  unit  for  all  his  sat- 
isforms  will  shift  to  that  satisform  least  esteemed  of  all. 
We  have  so  far  confined  our  discussion  to  those  utilities 
and  disutilities  which  are  of  interest  to  man  as  an  isolated 
individual.  "We  have  not  yet  reached  the  field  of  Econom- 
ies proper.  But  man  in  society  retains  his  individual  char- 
acteristics. He  does  not  cease  to  be  a  man;  and,  as  we 
shall  see,  all  those  facts  and  circumstances  which  affect  a 
Selkirk  in  his  attempt  to  compare  utilities  or  disutilities 
will  affect  him  when  he  attempts  to  measure  them  as  an 
exchanger  in  the  markets  of  civilized  society.  Other  facts 
will  intervene,  but  in  all  circumstances  he  will  find  use  for 
that  most  fundamental  of  all  economic  ideas — the  idea  of 
the  margin. 


CHAPTER  V. 

OP   INDUSTRY  AND  EXCHANGE. 

That  which  does  no  harm  to  the  state  can  do  no  harm  to 
the  citizen.  That  can  not  be  for  the  good  of  a  single  bee 
which  is  not  for  the  good  of  the  whole  hive. 

Marcus  Aurelius. 

Both  parties  to  an  exchange  will  be  benefited  if  the  utility 
which  each  gains  is  larger  to  him  than  the  utility  which  he 
parts  with.  John  M.  Gregory. 

In  order  to  pass  to  the  next  step  of  our  inquiry,  let  us 
assume  that  our  Selkirk  builds  a  rude  boat  and  starts  out 
upon  a  voyage  of  discovery.  On  a  neighboring  island  he 
finds  a  small  company  of  men  of  his  own  race  with  their 
wives  and  families  who,  like  himself,  have  been  ship- 
wrecked. Out  of  their  wreck  the  men  have  saved  various 
commodities  and  implements  sufficient  for  their  simplest 
needs.  At  first  Selkirk  takes  but  little  notice  of  this  fact. 
N"o  sooner  has  he  seen  these  men  than  he  determines  to 
abandon  his  island  and  all  his  fixed  improvements  and  cast 
his  lot  with  them.  The  mere  matter  of  their  companion- 
ship is  more  to  him  than  all  his  physical  possessions.  On 
the  other  hand,  they  are  glad  to  welcome  him  as  one  of 
their  number.  So  he  conveys  to  their  island  his  movable 
belongings  with  all  convenient  speed.  He  thus  willingly 
gives  up  the  result  of  many  days'  labor  spent  in  building 
an  abode  upon  his  own  island  and  cheerfully  exerts  himself 
to  huild  another  liome. 

59 


60  BISOCIALISM— ECONOMICS 

In  doing  this  Selkirk  weighs  the  advantages  of  compan- 
ionship against  the  labor-forms  which  he  must  lose,  and 
chooses  the  former.  He  may,  indeed,  be  said  to  exchange 
the  one  for  the  other,  but  it  must  be  observed  that,  in 
fact,  it  is  a  mere  change  on  his  part,  and  not  an  exchange 
in  any  commercial  sense.  No  one  acquires  anything  by 
what  he  loses,  or  loses  anything  by  what  he  acquires.  They 
all  gain  from  a  more  extended  companionship,  but  this 
gain  has  nothing  to  do  with  his  loss  of  improvements.  The 
gain  would  have  been  just  as  great  to  them  all,  and  greater 
to  him,  if  he  had  had  nothing  to  lose  by  deserting  his  own 
island.  There  are  many  instances  of  this  kind  in  our  daily 
lives.  We  often  relinquish  advantages  which  do  not  there- 
by accrue  to  others,  and  we  as  frequently  acquire  advan- 
tages without  any  corresponding  disadvantage  to  any  one 
else.  These  changes  have  no  economic  significance.  The 
loss  or  gain  is  confined  to  the  individual  and  can  not  be 
measured. 

The  men  upon  the  island  cooperate,  as  men  tend  to  do 
everywhere,  for  the  satisfaction  of  their  desires.  At  first 
their  cooperation  is  likely  to  take  the  form  of  joint  exer- 
tion of  physical  strength.  Thus,  in  building  huts,  they  can 
jointly  place  in  position  logs  which,  working  singly,  they 
could  not  even  move.  This  simple  illustration  may  stand 
for  others  of  the  same  class,  the  distinctive  characteristic 
being  the  union  of  labor-power  in  the  performance  of 
heavy  tasks.  On  the  other  hand,  in  the  joint  performance 
of  many  tasks  labor-power  is  not  united,  but  purposely  di- 
vided. One  man  rows  the  boat  while  another  casts  the 
line;  one  carries  the  cross-bow  or  the  gun;  another,  the 


OF  INDUSTRY  AND  EXCHANGE  61 

game.  Afterwards  they  adopt  the  simpler  forms  of  what  in 
a  more  complex  society  is  known  as  division  of  labor.  Thus, 
in  the  production  of  labor-forms  one  man  habitually  makes 
but  a  part,  and  often  a  small  part,  of  the  finished  product, 
and  so  is  enabled  to  acquire  skill  and  dexterity  otherwise 
impossible.  Each  man,  in  fact,  may  become  an  expert  in 
his  line,  and  the  joint  product  of  ten  men  is  vastly  more 
than  ten  times  as  great  as  the  aggregate  product  of  the 
same  men  working  independently  in  the  production  of 
labor-forms  of  the  same  kind;  for  aside  from  the  increase 
in  skill  there  is  a  saving  of  the  time  otherwise  required  by 
each  man  in  passing  from  one  kind  of  work  to  another. 

Then  again,  it  is  not  long  before  the  inventive  powers 
of  some  of  these  men  begin  to  develop.  A  tool  is  made 
which  enables  one  man  to  do  the  work  formerly  done  by 
two.  The  tool  suggests  the  simple  machine,  which  not  only 
increases  the  amount  which  one  man  may  produce  in  a 
given  time,  but  also  reduces  the  labor-power  to  be  exerted 
within  that  time.  Finally,  in  a  higher  civilization,  the 
complex  and  intricate  labor-saving  machinery  of  our  pres- 
ent factory  system  is  developed,  and  the  products  of  m'an's 
handiwork  are  prodigiously  increased  until,  in  present  con- 
ditions, the  world  at  times  seems  overstocked,  and  men 
by  hundreds,  thousands,  aye,  by  millions,  are  somehow 
compelled  to  stop  working  and  to  remain  idle  for  days  and 
months,  and  even  years,  because  of  a  seeming  and  so-called 
over-production. 

We  have  seen  that  nature  has  provided  certain  utilities 
so  generously  that  no  voluntary  action  on  the  part  of  man 
is  nece??ary  for  their  production  and  enjoyment;  as  air 


62  BISOCIALISM— ECONOMICS 

and  sunshine  in  ordinaiy  circumstances.  Such  utilities  are 
spontaneous.  So  far  as  they  alone  are  concerned  man  ex- 
ists without  the  exertion  of  labor-power.  We  have  also 
seen  that  the  exertion  of  labor-power  is  irksome  to  man, 
and  that  he  tends  to  satisfy  his  desires  with  as  little  irk- 
someness  as  possible.  His  ideal  is  to  reduce  all  labor-forms 
to  spontaneities.  In  practice  this  is  impossible,  but  he 
seeks  to  approach  spontaneity  as  closely  as  he  can;  he 
strives  to  lower  the  point  of  positive  utility  until  it  will 
coincide  with  the  point  of  spontaneity. 

Before  passing  to  the  next  step  in  the  development  of 
these  islanders,  let  us  note  that  so  far  we  have  considered 
their  cooperation  only  as  it  involves  the  exertion  of  labor- 
power  in  the  production  of  labor-forms.  Quantity  and  va- 
riety of  products  have  been  the  results  sought  and  ob- 
tained. The  union  of  effort  has  resulted  in  substantial 
buildings;  the  division  of  labor,  in  the  production  of  more 
hats,  more  coats,  more  shoes,  more  food,  and  more  kinds 
of  food.  But  when  a  man  has  one  or  two  coats  he  is  com- 
paratively content  on  that  score.  An  additional  quantity 
or  even  variety  of  coats  is  of  no  considerable  moment  to 
him.  But  he  may  have  no  shoes.  Another  may  have  both 
coat  and  shoes,  but  no  hat;  a  third  may  have  clothing  to 
spare,  but  no  food.  Taken  all  in  all,  there  is  in  the  com- 
munity plenty  of  clothing,  plenty  of  food,  and  plenty  of 
shelter,  these  constituting  the  simplest  satisforms;  but  no 
man  among  them  is  in  possession  of  a  supply  of  all  three. 
In  such  circumstances  these  men,  acting  naturally,  will 
exchange  labor-forms.    The  man  with  an  extra  coat  and  no 


OF  INDUSTRY  AND  EXCHANGE  63 

shoes  will  seek  another  who  has  an  extra  pair  of  shoes,  but 
no  coat.     Still  another  man  will  exchange  a  hat  for  food. 

Let  us  now  consider  the  islander  who  has  an  extra  coat, 
but  no  shoes.  He  has  secured  the  coat  by  the  exertion  of 
a  certain  amount  of  labor-power.  The  coat,  therefore,  to 
him  represents  a  certain  disutility.  He  has  reduced  the 
disutility  by  applying  his  labor-power  to  an  industry  with 
which  he  is  familiar — the  making  of  coats — rather  than  to 
one  of  which  he  knows  little  or  nothing — the  making  of 
shoes.  But  while  the  disutility  of  his  product  is  compara- 
tively low,  so,  also,  is  its  positive  utility  to  him  at  the  pres- 
ent time.  The  utility  of  a  pair  of  shoes  to  him  is  much 
greater  than  that  of  the  coat,  but  if  he  had  to  make  the 
shoes  himself,  the  disutility  would  be  so  great  as  to  offset 
much  of  the  utility,  thus  leaving  the  positive  utility  of  the 
shoes  comparatively  small.  His  plan  is  to  produce  a  coat 
with  small  disutility,  and  then  exchange  it  for  a  pair  of 
shoes  of  greater  utility,  and  thus  enjoy  the  benefit  of  a 
maximum  of  utility  as  the  result  of  a  minimum  expendi- 
ture of  labor-power.  The  natural  law  by  which  men  ever}'- 
where  attempt  to  secure  a  maximum  of  utility  with  a  min- 
imum of  disutility  is  the  economic  "law  of  gravity." 

"With  the  producer  of  the  pair  of  shoes  the  conditions 
are  just  the  reverse,  but  the  ultimate  object  is  the  same. 
His  pair  of  shoes  represents  to  him  a  comparatively  small 
disutility,  and  he  hopes  to  exchange  his  product  for  a  coat 
having  to  him  vastly  greater  utility  than  the  shoes.  He, 
also,  obeys  the  ''law  of  gravitj'"  of  the  market. 

When  they  have  exchanged  labor-forms,  the  one  has  se- 
( ';ro(l  n  pair  of  shoes  Avith  the  disutility  of  making  a  coat; 


64  BISOCIALISM— ECONOMICS 

and  the  other,  a  coat  with  the  disutility  of  making  a  pair 
of  shoes.  Both  are  gainers  by  the  transaction;  not  neces- 
sarily equal  gainers,  but  that  gives  them  no  concern.  Both 
are  better  off  than  if  the  exchange  had  not  been  made; 
neither  has  suffered  a  whit  because  of  it.  Each  has  satis- 
fied his  desire  with  the  least  labor-power,  and  each  is  in 
possession  of  his  product  or  what,  to  him,  is  a  satisfactory 
equivalent. 

Our  illustration  has  assumed  an  "even  trade,"  but  not  of 
necessity.  In  the  discussion  of  the  estimates  put  upon  dif- 
ferent labor-forms  by  our  Selkirk  alone  upon  his  island,  we 
found  that  such  estimates  were  influenced  by  at  least  four 
possible  circumstances,  or  conditions,  which  affect  intensity 
of  desire.  All  these  and  other  considerations  may  enter 
into  the  calculations  of  each  of  the  two  islanders  in  the  ex- 
change just  described.  The  intensity  of  the  desire  of  one 
of  them  for  a  coat  will  vary  greatly  according  to  the  season 
of  the  year,  and  from  other  causes.  If  he  has  no  coat  at 
all,  his  desire  will  be  greater  than  if  he  has  an  old  coat 
which  he  intends  to  wear  for  a  time  before  entering  into 
the  enjoyment  of  a  new  one.  If  he  desires  the  coat  merely 
for  bodily  comfort,  he  will  esteem  it  less  than  if  it  will  also 
administer  considerably  to  a  desire  for  display — a  desire 
to  be  in  style.  If  his  desire  is  simply  for  a  work  coat,  its 
place  may  be  supplied  by  a  simpler  and  smaller  garment, 
as  a  jacket  or  a  roundabout.  And  the  number  of  coats 
possessed  either  by  himself  or  by  the  other  islander  in 
question,  if  known  to  the  former,  will  affect  his  estimate 
of  the  coat  which  he  desires  to  secure.  Again,  a  like  num- 
ber of  considerations  may  affect  his  estimate  of  the  pair 


OF  INDUSTRY  AND  EXCHANGE  65 

oi  shoes  which  he  proposes  to  exchange  for  the  coat;  and 
to  these  must  be  added  all  the  considerations  which  go  to 
the  question  not  of  utility,  but  of  disutility,  which  will  be 
greater  or  less  according  to  his  opportunities  for  the  use 
of  tools  and  all  other  labor-saving  devices  in  their  manu- 
facture. 

On  the  other  hand,  the  maker  of  the  coat  is  beset  with  a 
like  number  of  considerations  upon  his  side  of  the  transac- 
tion. From  this  point  of  view  the  matter  of  the  exchange 
which  seemed  at  first  simple  appears  now  exceedingly  com- 
plex, especially  when  we  include  in  the  category  of  deter- 
mining factors  not  only  the  tendency  of  each  to  make  the 
best  of  the  bargain  so  as  to  secure  the  greatest  results  from 
his  labor,  but  also  the  varying  degrees  of  shrewdness  with 
which  they  severally  carry  on  the  "higgling  of  the  mar- 
ket," which  finally  fixes  the  terms  upon  which  the  ex- 
change is  made. 

The  fraction  ^  when  encountered  by  a  child  in  the  first 
lesson  in  common  fractions  is  a  very  simple  thing,  and  is 
easily  understood.  The  complex  fraction  with  half  a  dozen 
other  complex  fractions  for  its  numerator  and  as  many 
more  complex  fractions  for  its  denominator  which  he  en- 
counters later  on  among  the  miscellaneous  problems  is  to 
all  appearances  quite  a  different  matter;  but  when  the  sim- 
ple rules  of  multiplication  and  division  are  applied  to  it, 
its  complexity  disappears,  and  the  result,  when  it  has  been 
reduced  to  its  simple  form,  is  found,  perchance,  to  be  ^. 
In  much  the  same  way  all  of  the  complexity  of  the  prob- 
lem of  exchange  vanishes  when  the  parties  thereto  auto- 


66  BISOCIALISM— ECONOMICS 

niatically  and  almost  unconsciously  reduce  their  various  es- 
timates to  their  simplest  forms. 

Each  man  has  in  his  consciousness,  if  not  actually  in  his 
possession,  some  labor-form  which  he  will  barely  exert  him- 
self to  save,  if  he  has  it,  or  to  possess,  if  he  has  it  not,  and 
which  has,  consequently,  for  him  but  one  unit  of  positive 
utility,  and  which  represents  to  him  but  one  unit  of  dis- 
utility. To  this  marginal  labor-form  he  refers  and  with 
it  compares,  first,  the  labor-form  which  he  has,  and  then 
the  one  he  has  not.  In  this  way  he  is  enabled  accurately 
to  compare  his  estimate  of  the  one  with  his  estimate  of  the 
other.  This  done,  if  he  prefers  what  he  has  not  to  what  he 
has,  he  determines  at  once  to  exchange,  provided  the  dis- 
utility of  the  labor-form  secured  in  this  manner  is  not 
greater  than  the  disutility  of  producing  a  similar  labor- 
form  himself.  Having  decided  to  exchange,  and  having 
not  only  the  desire  but  the  wherewithal  to  secure  what  he 
desires,  he  is  economically  capable;  and  if  no  third  party  in- 
tervenes, the  respective  abilities  of  himself  and  his  oppon- 
ent to  higgle  will  determine  the  point  of  exchange. 

A  Capable  Buyer  in  a  given  market  is  one  who  is  both 
willing  and  able  to  buy  at  the  market  price  rather  than 
not  buy  at  all. 

After  the  maker  of  the  coat  has  made  his  own  estimates 
of  the  two  labor-forms  he  will  consider  the  various  cir- 
cumstances likely  to  influence  the  maker  of  the  shoes  in 
the  formation  of  his  estimates,  and  so  anticipate,  as  far 
as  he  can,  the  action  of  the  latter.  The  maker  of  the  shoes 
will  do  likewise,  and  the  comparative  skill  of  the  two  as 
traders  will  decide  the  terms  upon  which  the  exchange  is 


OF  INDUSTRY  AND  EXCHANGE  67 

made.  But  after  all,  the  transaction  is  one  of  simple  bar- 
ter between  the  two,  wholly  uninfluenced  by  circumstances 
outside  themselves.  So  far  the  results  obtained  do  not  dif- 
fer in  effect  from  those  derived  from  physical  cooperation 
in  the  union  or  division  of  labor.  In  each  of  these,  how- 
ever, the  active  participation  of  each  person  involved  is  es- 
sential to  the  final  result.  The  mere  presence  of  bystand- 
ers, however  capable  they  may  be,  avails  nothing  in  indus- 
try. Their  labor-power  must  be  brought  into  use  in  order 
to  be  effective. 

It  is  otherwise  in  the  matter  of  exchange.  A  capable 
bystander  upon  either  side  of  the  market  is  not  without 
influence.  Let  us  assume  that  hvo  islanders  have  extra 
coats,  both  being  in  want  of  shoes.  The  three  men  now 
meet  for  barter,  and  all  are  capable  traders.  All  of  the  con- 
siderations which  influenced  the  traders  when  there  were 
but  two  will  influence  the  three.  They  will  severally  make 
their  estimates  in  substantially  the  same  way.  But  when 
expression  is  given  to  these  estimates  the  fact  of  the  pres- 
ence of  the  second  coat  owner  will  cause  the  owner  of  the 
shoes  to  set  his  asking  price  on  the  shoes  high  and  to  offer 
a  relatively  low  price  for  a  coat.  On  the  other  hand,  the 
first  coat  owner  will  be  influenced  by  the  presence  of  the 
second,  and  will  consent  to  take  less  for  his  coat,  or,  what 
is  the  same  thing,  to  give  more  for  the  shoes  than  he  other- 
wise would,  and  so  make  the  exchange.  Thus  the  mere 
presence  of  the  second  coat  owner  as  a  possible  and  capa- 
ble trader  for  the  shoes,  although  he  may  not  even  have 
made  a  bid  for  them  openly,  may  cause  the  fir?t  coat  owner 


68  BISOCIALISM— ECONOMICS 

to  give  not  only  a  coat,  but  a  vest,  also,  for  the  pair  of 
shoes. 

In  this  transaction  we  note  that  the  presence  of  the  sec- 
ond coat  owner  has  not  affected  the  other  parties  equally 
or  in  like  manner.  It  has  given  to  the  shoes  a  greater, 
and  to  the  coat  a  less  utility  to  those  who  offer  them,  re- 
spectively, in  the  market.  From  another  point  of  view  it 
caused  the  owner  of  the  shoes  to  acquire  what  he  desired 
at  a  less,  and  the  coat  owner  at  a  greater  disutility  than 
would  otherwise  have  been  the  case.  Both  have  satisfied 
their  desires  with  the  least  effort  in  the  circumstances, 
however,  and  each  has  his  labor-form,  or  what  to  him  is 
its  equivalent,  for  otherwise  there  would  have  been  no  ex- 
change. 

Men  by  associated  effort  may  strive  to  put  themselves 
into  the  best  relations  with  their  physical  environment. 
They  may  unite  labor-power  to  labor-power  when  greater 
strength  is  required.  They  may  divide  their  tasks  when 
greater  skill  or  a  saving  of  time  is  sought.  They  may 
make  tools  and  machinery  to  supplement  both  strength  and 
skill  by  calling  to  the  assistance  of  man  the  powers  of  na- 
ture and  the  mathematical  precision  of  the  mechanic  arts. 
These  efforts  may  extend  from  the  simplest  cooperation,  as 
in  the  building  of  a  hut  in  the  wilderness,  to  the  exquisite 
finishing  of  the  most  delicate  products  of  modern  indus- 
try, and  from  the  transportation  of  logs  in  the  "lumber 
woods"  to  the  transmission  of  intelligence  by  telegraph  or 
telephone.  Yet  in  all  these  things  we  have  but  the  appli- 
cation of  labor-power  for  the  purpose  of  overcoming  the 
disutilities  of  nature.    They  are  but  manifestations  of  man's 


OF  INDUSTRY  AND  EXCHANGE  69 

desire  to  approximate  the  spontaneity  of  nature  in  the  phy- 
sical world  by  annihilating  the  disutilities  of  matter,  space 
and  time.  They  result  simply  in  an  increase  of  positive 
physical  utility. 

We  have  seen,  however,  that  men  in  association  attempt 
to  satisfy  their  desires  not  only  by  creating  labor-forms, 
but  by  exchanging  them;  by  taking  advantage  not  only  of 
physical  utility,  but  of  the  utility  of  social  environment. 
When  a  labor-form  has  entered  the  market  for  exchange 
its  importance  to  its  possessor  depends  upon  its  commer- 
cial rather  than  upon  its  industrial  utility.  These,  how- 
ever, are  but  forms  of  intermediate  utility. 

Industrial  Utility  is  that  form  of  intermediate  utility 
which  avails  its  possessor  in  the  processes  of  industry. 

Commercial  Utility  is  that  form  of  intermediate  utility 
which  avails  its  possessor,  as  seller,  in  the  processes  of  ex- 
change. 

Commercial  utility,  as  we  have  so  far  discussed  it,  has 
two  of  the  elements  of  direct  measurement.  It  lies  be- 
tween the  point  of  disutility,  where  all  economic  utility 
begins,  and  the  point  of  exchange.  We  have  not  yet  de- 
veloped a  common  unit  of  measurement,  however,  nor  are 
we  ready  to  define  the  point  of  exchange. 

The  presence  in  the  market  of  other  capable  buyers 
compels  the  successful  bidder  to  give  more  for  an  article, 
and  so  gives  rise  not  only  to  a  commercial  utility,  but  to 
a  commercial  disutility.  In  the  case  last  considered  we 
found  that  with  but  two  exchangers  in  the  market  one  of 
them  secured  a  pair  of  shoes  in  return  for  a  coat.  But 
the  coming  of  a  second  capable  shoe  buyer  into  the  mar- 


W  BISOCIALISM— ECONOMICS 

kct  caused  the  first  to  give  iu  exchange  a  coat  and  vest 
for  a  pair  of  shoes.  In  the  market  and  at  the  point  of 
exchange  the  disutility  of  the  pair  of  shoes  was  as  to  him 
increased  by  the  presence  of  another  capable  shoe  buyer, 
or,  in  other  words,  a  competitor.  This  disutility  arises 
from  the  fact  that  only  one  person  can  wholly  possess  and 
enjoy  a  given  labor-form  at  any  given  time.  This  is  a 
physical  fact,  but  assumes  a  social  aspect  when  mani- 
fested in  the  market.  Experience  teaches  us  that  in  every 
general  market  this  disutility  asserts  itself  and  is  recog- 
nized, under  the  name  of  "competition,"  as  the  determin- 
ing factor  in  every  exchange.  The  disutility  which  arises 
from  the  acquisition  of  utility  by  means  of  exchange  we 
shall  call  commercial  disutility.  This  will  distinguish  it 
from  that  disutility  which  arises  from  the  acquisition  of 
utility  by  means  of  the  processes  of  industry. 

All  disutility  is  onerous,  so  that  we  do  not  have  a 
division  of  disutility  to  correspond  to  the  distinction  be- 
tween spontaneous  and  onerous  utility.  But  like  utilities, 
disutilities  may  be  either  absolute  or  relative.  The  dis- 
utility of  gaining  a  certain  end  may  be  the  disutility  of 
giving  life  itself,  but  ordinarily  disutilities  are  susceptible 
of  comparison.  Industrial  and  commercial  disutilities  are 
but  forms  of  relative  disutility. 

Absolute  Disutility  is  irksomeness  of  acquisition  without 
relation  to  the  irksomeness  of  any  or  all  other  disutilities. 

Relative  Disutility  is  irksomeness  of  acquisition  in  rela- 
tion to  the  irksomeness  of  any  or  all  other  disutilities. 

Economics  takes  no  note  of  absolute  disutilities.  We 
therefore  exclude  them  from  further  consideration. 


OF  INDUSTRY  AND  EXCHANGE  71 

Industrial  Disutility  is  that  form  of  relative  disutility 
which  arises  from  the  acquisition  of  utility  by  means  of 
the  processes  of  industry. 

Commercial  Disutility  is  that  form  of  relative  disutility 
which  arises  from  the  acquisition  of  utility  by  means  of 
exchange. 

In  the  early  part  of  our  discussion  reference  was  made 
to  the  fact  that  labor-forms  are  primarily  of  two  kinds 
according  as  they  avail  a  consumer  subsequent  to  all  the 
processes  of  industry  and  exchange  or  a  producer  in  some 
of  these  processes.  For  the  sake  of  clearness  we  shall 
here  repeat  four  definitions  and  add  two  which  grow  out 
of  these. 

Labor-Power  is  the  physical  or  mental  power  of  man 
irksomely  exerted  for  the  satisfaction  of  desire. 

A  Labor-Form  is  any  material  object,  great  or  small,  so 
circumstanced  that  its  present  distinctive  utility  is  the 
result  of  labor-power. 

A  Satisform  is  a  labor-form  so  circumstanced  that  it 
avails  a  consumer  subsequent  to  all  the  processes  of  in- 
dustry and  exchange. 

A  Capital-Form  is  a  labor-form  so  circumstanced  that  it 
avails  a  producer  in  some  of  the  processes  of  industry  or 
exchange. 

An  Aid-Form  is  a  capital-form  so  circumstanced  that  its 
distinctive  utility  is  industrial. 

A  Trade-Form  is  a  capital-form  so  circumstanced  that 
its  distinctive  utility  is  commercial. 

"We  have  also  seen  that  the  distinctive  utility  of  a  satis- 
form is  ultimate;  of  a  capital-form,  intermediate.     Ulti- 


73  BISOCIALISM— ECONOMICS 

mate  and  intermediate  utility  on  the  one  hand,  and  in- 
dustrial and  commercial  utility  on  the  other,  are  divisions 
and  subdivisions,  respectively,  of  relative  utility.  They 
are  not  independent  utilities,  but  are  merely  forms  of 
relative  utility.  To  a  large  extent  they  are  interconvert- 
ible. Ultimate  utilities  may  be  thrown  back  upon  the 
market  and  so  become  trade-forms  (intermediate  utilities); 
while  trade-forms  are  constantly  passing  into  the  domain 
of  satisforms  (ultimate  utilities).  All  industrial  utilities 
may  be  changed  for  the  time  being  from  aid-forms  to 
trade-forms;  while  trade-forms  are  constantly  leaving  the 
field  of  exchange  to  become  the  instruments  of  industry. 
As  we  shall  see,  commercial  utilities  and  disutilities  are 
forms  which  all  relative  utilities  and  disutilities  must 
assume  for  the  purposes  of  measurement. 


CHAPTER  VI. 

OF  THE  MARGINAL  PAIR. 

The  price  coincides  very  nearly  with  the  estimate  of  the 
"last  buyer."  E.  von  Boehm-Bawerk. 

Let  us  now  assume  that  three  coat  owners  enter  the 
market  where,  as  before,  there  is  but  one  person  with  an 
extra  pair  of  shoes.  All  of  the  conditions  which  we  have 
noted  will  apply,  and  there  will  be  from  the  start  one 
of  the  three  coat  owners  who,  because  of  the  greater 
intensity  of  his  desire,  will  tend  to  lead  in  the  bidding 
for  the  shoes,  although  he  will  try  to  get  them  with  as 
little  disutility  as  possible.  If  the  three  have  equal  abili- 
ties for  exchange,  the  one  having  the  greatest  need  or 
desire  for  the  shoes  will  be  the  most  capable  of  the 
capable  buyers  in  that  market,  and  the  one  with  which 
the  owner,  or  seller,  of  the  shoes  will  most  readily  strike  a 
bargain.  Whenever  there  is  more  than  one  capable  buyer 
for  an  article  in  a  limited  market,  one  of  them  will  be  the 
most  capable,  and  will  make  the  actual  exchange,  al- 
though every  capable  buyer  will  to  some  extent  influence 
the  fixing  of  the  point  of  exchange.  But  whenever  there 
is  a  one-sided  market,  with  all  or  a  greater  part  of  the 
competition  among  the  buyers,  the  most  capable  buyer — 
the  capable  buyer  with  the  greatest  desire — will  tend  to 
fix  the  point  of  exchange.     This  results  in  a  correspond- 

73 


74  BISOCIALISM— ECONOMICS 

ingly  great  disutility  to  the  buyers  in  such  a  market.  The 
disutility  of  competition  in  such  case  is  thrown  upon  the 
buyers,  while  the  utility  is  enjoyed  by  the  seller  or  sellers. 
It  is  natural  enough,  perhaps,  in  such  conditions,  that 
the  sellers  should  endeavor  to  retain  their  advantage,  even 
to  the  extent  of  persuading  the  buyers  that  such  is  the 
natural  and  necessary  condition  of  every  market. 

The  entrance  of  other  capable  buyers  of  shoes  into  this 
market — neither  the  number  of  sellers  nor  the  stock  of 
shoes  being  increased — could  only  result  in  greater  diverg- 
ence of  desires  between  the  most  capable  and  the  least 
capable  buyer,  until  the  disutility  of  obtaining  a  pair  of 
shoes  by  exchange  would  approximate  the  disutility  of 
making  them  at  first  hand.  Thus  the  utility  of  the  mar- 
ket w^ould  be  reduced  to  a  minimum,  if  not  entirely  de- 
stroyed. For  even  in  a  one-sided  market  the  commercial 
disutility  of  a  labor-form  can  not,  as  a  rule,  be  made  to 
exceed  its  industrial  disutility  to  the  most  capable  buyers; 
for  otherwise  there  is  in  even  the  most  capable  buyers  no 
motive  for  exchange. 

Let  us  now  consider  a  one-sided  market  in  which 
there  are  more  sellers  of  shoes  than  buyers.  If  there  are 
two  sellers  and  but  one  buyer,  one  of  the  sellers  will  make 
the  exchange,  but  he  will  do  so  at  a  lower  point  than  if 
he  were  the  only  seller.  The  presence  of  the  second  seller 
is  a  disadvantage  to  him  and  a  corresponding  advantage 
to  the  buyer.  If  another  seller  enters  the  market,  the 
disadvantage  to  the  most  capable  seller  is  increased,  as  is 
also  the  advantage  to  the  buyer. 

A  Capable  Seller  in  a  given  market  is  one  who  is  both 


OF  THE  MARGINAL  PAIR  75 

n!)le  and  williDg  to  sell  at  the  market  price  rather  than  not 
sell  at  all. 

It  will  be  noted  that  in  such  a  one-sided  market  the 
most  capable  seller  is  the  one  who  has  the  least  desire 
to  retain  his  extra  pair  of  shoes  as  compared  with  the 
desire  to-  acquire  a  coat.  That  is,  he  is  the  one  most 
anxious  to  sell.  It  follows  that  if  the  number  of  sellers 
be  increased,  the  number  of  buyers  remaining  the  same, 
the  point  of  exchange  will  be  forced  down  until  there 
remains  but  one  unit  of  utility  to  the  most  capable  seller. 
In  normal  conditions  it  can  not  be  forced  lower,  for  then 
even  the  most  capable  seller  would  have  no  motive  for 
exchange.  Therefore,  in  one-sided  markets  the  point  of 
exchange  of  a  given  labor-form  will  range  from  its  dis- 
utility to  the  most  capable  buyer  (highest  bidder)  down 
to  its  utility  to  the  most  capable  (or  lowest)  seller,  accord- 
ing as  the  advantage  of  the  market  is  with  the  sellers  or 
the  buyers,  respectively. 

Let  us  now  consider  a  market  in  which  there  are  two 
sellers  and  two  buyers  of  coats,  each  seller  having  but  one 
extra  coat.  The  most  capable  buyer  and  the  most  capable 
>eller — called  the  most  capable  pair  in  the  market — will 
first  exchange,  their  point  of  agreement  being  influenced 
by  the  presence  in  the  market  of  the  other  men.  These 
will  then  be  left  to  agree  upon  an  exchange  without  refer- 
ence to  the  first  pair  who,  having  satisfied  their  desires 
through  exchange,  are  now  out  of  the  market. 

In  our  discussion  of  utility  and  disutility  we  were  led  to 
consider  the  point  of  spontaneity,  the  point  of  disutility, 
the  point  of  positive  utility,  and  the  marginal  units  of 


•ye  BISOCIALISM— ECONOMICS 

utility  and  disutility.  In  the  foregoing  discussion  of  ex- 
changes in  one-sided  markets  we  have  considered,  also,  the 
point  of  exchange,  which  lies  at  the  upper  limit  of  com- 
mercial utility.  "We  have  now  to  consider  the  point  of 
exchange  as  it  is  manifested  in  a  general  market. 

We  have  been  considering  a  small  market  in  which  men 
have  met  for  the  purposes  of  barter.  In  developing  a 
larger  market,  it  will  not  be  necessarj-'  for  us  at  this  time 
to  trace  the  various  steps  in  the  growth  of  the  market  until 
men  have  ceased  to  barter  and  have  agreed  upon  some 
labor-form,  as  gold  or  silver,  for  use  as  a  medium  of 
exchange.  For  convenience  we  will  for  the  present  assume 
that  men  have  adopted  gold  and  silver  as  current  trade 
metals,  and  that  these  metals  have  been  coined  into  units 
with  various  fractional  and  multiple  denominations  as  in 
the  case  of  current  coin. 

After  money  comes  into  current  use  and  a  general  mar- 
ket is  established,  each  man  produces  labor-forms  to 
l)e  turned  by  sale  into  money,  with  which  he  purchases 
other  labor-forms  as  his  needs  may  require.  This 
we  know;  but  out  of  these  seemingly  simple  transactions 
arise  certain  economic  definitions  and  laws  of  the  highest 
importance. 

An  Ordinary  Trade-Form  is  a  trade-form  which  is 
bought  and  sold  in  the  ordinary  process  of  the  market. 

A  Current  Trade-Form  is  a  trade-form  which  passes 
current  in  the  market  as  a  medium  of  exchange. 

Current  trade-forms,  current  debit-forms,  and  current 
credit-forms  constitute  the  money-forms  of  modern  com- 
merce.    The  additional  forms  will  be  defined  later. 


OF  THE  MARGINAL  PAIR  77 

We  have  seen  that  in  any  market  containing  several 
capable  buyers  there  is  one  who  is  most  anxious  to  pur- 
chase. We  have  also  seen  that  in  a  one-sided  market  with 
few  sellers  and  many  buyers  the  most  anxious  buyer  is 
the  one  who  will  first  exchange.  The  price  may  then  fall 
to  the  bid  of  the  next  buyer,  and  so  on,  it  being  possible 
in  such  a  market  to  have  a  different  price  for  each  pur- 
chase. The  same  shifting  of  price  may  result  from  a 
one-sided  market  with  many  sellers  and  but  few  buyers, 
except  that  the  price  will  tend  to  increase  with  each  pur- 
chase and  sale,  as  the  most  anxious  or  cheapest  sellers 
will  first  dispose  of  their  wares.  But,  as  is  well  known, 
in  a  general  market  in  which  there  are  many  sellers  and 
many  buyers,  and  in  which  the  supply  of  ordinary  trade- 
forms  and  the  demand  for  them  tend  toward  an  equil- 
ibrium, the  price  does  not  differ  with  each  sale,  nor  does 
it  tend  to  do  so.  On  the  contrary,  the  tendency  is  toward 
a  fixed  market  price  at  which  all  must  sell  and  all  must 
buy  in  that  market.  This  is  one  of  the  most  interesting 
as  well  as  the  most  important  facts  which  we  have  to 
consider.  It  constitutes  one  of  the  most  talked  about  and 
least  understood  phases  of  economic  phenomena. 

One  of  the  first  things  which  a  buyer  learns  is  the 
advantage  of  concealing  his  own  desires  and  necessities, 
and  of  assuming  an  indifference  which  is  felt  only  by  those 
buyers  whose  desires  and  necessities  are  least  of  all.  The 
seller  also  learns  to  conceal  his  necessities,  if  any  such 
exist,  but  he  must  constantly  evince  his  desire  to  sell 
by  advertising,  window  displays,  and  the  thousand  and 
one  expedients  known  to  the  modern  merchant.    The  ulii- 


78  BISOCIALISM— ECONOMICS 

mate  effect  of  the  tendency  of  buyers  to  conceal  their  de- 
sires is  to  abolish,  in  a  general  market,  all  open  competi- 
tion among  buyers.  While  the  ultimate  effect  of  the  ten- 
dency among  sellers  to  attract  huyers  at  all  hazards  is  to 
intensify,  in  a  general  market,  the  open  competition  among 
sellers. 

To  illustrate:  There  is  little,  if  any,  conscious  and  open 
competition  among  the  buyers  of  staple  groceries  and  dry 
goods  in  an  ordinary  country  town;  but  there  is  consider- 
able conscious  and  open  competition  among  even  country 
merchants.  In  large  cities  there  is  absolutely  no  open  com- 
petition among  the  buyers  of  goods  at  a  mammoth  depart- 
ment store.  It  matters  not  that  one  purchaser  may  be 
practically  destitute  of  clothing  and  another  supplied  be- 
yond his  actual  needs;  the  price  is  the  same  to  both.  A 
starving  man  enters  a  restaurant  and  sits  at  the  same  table 
with  an  epicure  who  is  so  surfeited  that  he  can  scarcely 
select  from  a  most  elaborate  bill  of  fare  a  morsel  that  is 
even  palatable  to  him;  yet  the  starving  man  pays  no  more 
than  the  epicure.  The  price  was  fixed  before  they  came, 
and  neither  the  abnormal  appetite  of  the  one  nor  the  lack 
of  appetite  of  the  other  affects  it  in  the  least.  They  do 
not  bid  against  each  other.  What  does  fix  the  price? 
Supply  and  demand?  As  well  say,  "Chops  and  tomato 
sauce"  for  all  that  the  hackneyed  phrase  "supply  and  de- 
mand" means  as  currently  used. 

The  difficulty  of  answering  this  question  as  to  the  de- 
termining factor  or  factors  of  market  price  is  increased  by 
the  fact  that  there  is  nowhere  a  market  of  any  considerable 
consequence  in  which  tlie  natural  laws  of  exchange  have 


OF  THE  MARGINAL  PAIR  79 

free  play.  Everywhere  that  we  may  seek  to  examine  the 
market  we  shall  find  that  it  is  affected  more  or  less  by 
juridical  institutions,  laws  and  customs  which  interfere 
with  normal  conditions.  This  makes  it  necessary  for  us 
to  distinguish  between  normal  and  abnormal  economic 
conditions,  and  between  the  normal  and  the  abnormal  mar- 
ket. 

Juridical  Institutions,  Laws  and  Customs  are  in- 
stitutions, laws  and  customs  which  are  recognized  and  en- 
forced by  the  judicial  powers  of  the  State. 

A  Normal  Market  is  a  market  unaffected  by  juridical  in- 
stitutions, laws  or  customs  which  interfere  with  normal 
conditions. 

An  Abnormal  Market  is  a  market  affected  by  juridical 
institutions,  laws  or  customs  which  interfere  with  normal 
conditions. 

In  the  following  discussion  of  market  and  price  and  of 
value  and  cost  the  examination  of  facts  and  principles  is 
confined  to  normal  conditions  except  in  instances  in  which 
the  contrary  is  specially  noted.  This  noting  is  usually 
done  by  the  use  of  the  term  "in  present  conditions."  By 
the  use  of  this  term  we  mean  conditions  of  the  market 
abnormally  affected  by  present  juridical  institutions,  laws 
and  customs. 

In  the  science  of  mechanics  there  is  discussed  a  process 
called  the  composition  of  forces  by  means  of  which  a 
single  physical  force  is  found  which  is  the  concentrated 
effect  of  two  or  more  separate  forces  acting  in  given  di- 
rections and  meeting  at  a  common  center.  This  single 
force   when    found,    or   composed,   is   measurable   and   is 


80  BISOCIALISM— ECONOMICS 

called  the  resultant.  In  connection  with  every  re- 
sultant there  is  conceived  to  be  a  force  acting  in 
the  opposite  direction  which  just  equals  it  and  which 
is  called  an  equilibrant.  If  Economic  Science,  so- 
called,  be  truly  a  science,  it  must  disclose  a  process  by 
means  of  which  a  single  resultant  may  be  found  which  is 
the  concentrated  effect  of  all  the  economic  forces  which 
center  in  the  market.  It  must  do  this  just  as  completely 
and  with  as  much  certainty  as  mechanical  science  is  en- 
abled to  compose  physical  forces  into  measurable  resul- 
tants and  their  corresponding  equilibrants.  That  Eco- 
nomic Science  is  a  true  science,  and  that  the  composition 
of  those  economic  forces  which  center  in  the  market  finds 
a  measurable  resultant  in  Talue  and  a  corresponding  equi- 
librant in  cost  we  now  proceed  to  prove. 

We  have  seen  that  in  any  market  the  competition 
among  sellers  persists.  In  fact,  the  larger  the  market  the 
greater  the  competition  becomes.  In  the  country  town  the 
merchants  compete,  but  are  comparatively  at  ease;  w^hile 
in  the  large  city,  in  present  conditions,  men  lie  awake  at 
night  evolving  plans  for  enlarging  their  trade  at  the  ex- 
pense of  their  competitors.  Now,  in  any  general  market 
there  is  one  seller  who,  in  respect  to  a  given  trade-form, 
is  most  anxious  to  sell.  If  he  has  but  a  small  supply  of 
that  trade-form  compared  with  the  usual  demand  in  that 
market,  he  may  lower  his  price  and  dispose  of  his  supply 
without  affecting  the  general  market  price.  His  action  in 
so  doing  will  be  known  to  but  few.  In  such  case  he  is  not, 
economically  speaking,  an  integral  part  of  the  general  mar- 
ket, but  rather  an  isolated  and  incidental  seller.    But  if 


OF  THE  MARGINAL  PAIR  81 

his  supply  of  such  trade-form  is  sufficient  to  affect  the  en- 
tire market,  he  becomes  a  marginal  seller  upon  that  mar- 
ket, and  competition  forces  all  other  sellers  to  offer  simi- 
lar trade-forms  at  his  price.  It  makes  no  difference  how- 
large  the  market,  if  the  supply  of  a  given  seller  be  large 
enough,  he  may  set  a  price  which  all  others  must  meet. 
The  marginal  seller,  then,  is  the  determiner  of  price  upon 
his  side  of  the  market. 

The  Marginal  Seller  of  a  given  trade-form  is  the  most 
anxious  seller  whose  supply  of  such  trade-form  is  suffi- 
cient to  affect  the  entire  market. 

In  a  large  market  there  are  usually  several  sellers  who 
are  equally  capable  and  equally  anxious  to  sell,  and  who 
consequently  offer  a  given  trade-form  at  the  same 
price.  If  their  combined  supplies  are  sufficient  to  affect 
the  entire  market,  the  price  fixed  by  them  becomes  the 
market  price.  In  such  cases  they  constitute  the  "marginal 
group"  of  sellers,  and  practically  act  as  one  man. 

"We  have  seen  that  in  any  general  market  the  open  com- 
petition among  buyers  tends  to  diminish  and  finally  to  dis- 
appear. We  must  not  conclude  from  this,  however,  tkat 
the  buyers  of  a  given  trade-form  have  little  or  nothing  to 
do  with  fixing  its  price.  As  a  class  they  appear  to  buy 
at  a  price  already  fixed;  and  as  a  class,  the  sellers  appear 
to  fix  the  price.  But  the  fact  is  contrary  to  the  appear- 
ance. In  the  absence  of  monopoly  the  price  is  not  fixed 
arbitrarily  by  the  seller.  It  is  largely  determined  by  the 
desires  of  those  capable  but  indifferent  buyers  whose  par- 
ticipation is  necessary  to  exhaust  the  supply  in  the  given 
market. 


82  BISOCIALISM— ECONOMICS 

Suppose  that  in  a  given  market,  at  the  beginning  of  the 
fruit  season,  100  baskets  of  peaches  are  received  and  of- 
fered for  sale.  This  fruit  is  perishable  and  must  all  be 
disposed  of  quickly  in  order  to  avoid  deterioration  and 
loss.  Let  us  assume  that  the  supply  is  divided  among 
three  or  four  dealers,  and  that  it  is  necessary,  in  order  to 
avoid  loss,  to  dispose  of  the  entire  stock  upon  the  day  of 
its  arrival.  There  are  in  that  market  five  families  able  and 
willing,  if  necessary,  to  pay  $5  a  basket  for  peaches;  ten 
other  families  who  are  capable  buyers  at  not  exceeding  $3; 
fifteen  other  families,  at  not  exceeding  $2;  seventy  other 
families,  at  not  exceeding  $1  per  basket,  and  all  of  the 
sellers  are  aware  that,  from  the  state  of  the  demand,  their 
entire  stock  can  not  be  sold  unless  the  market  price  be- 
comes as  low  as  $1  per  basket.  In  the  ordinary  course  of 
business  in  such  circumstances  each  dealer  marks  his 
peaches  at  $1  per  basket,  and  all  buyers  take  advantage 
of  that  price. 

On  the  next  day  150  baskets  of  peaches  are  received 
in  that  market,  and  the  capable  demand  of  the  100  families 
above  mentioned  remains  the  same,  but  in  addition  to  these 
there  are  fifty  families  who  will  buy  peaches  at  not  ex- 
ceeding 75  cents  per  basket.  The  price  of  peaches  for  that 
day  is  75  cents.  If,  on  the  next  day,  250  baskets 
are  received,  and  one  hundred  additional  families  are  ca- 
pable buyers  at  not  exceeding  50  cents  per  basket,  that 
sum  is  the  price  necessary  to  be  fixed  in  order  to  exhaust 
the  entire  supply  of  peaches.  If  the  price  at  which  the  en- 
tire supply  can  be  disposed  of  is  not  known  to  the  dealers 
in  advance,  the  market  price  may  start  higher  and  fall  dur- 


OF  THE  MARGINAL  PAIR  83 

ing  the  day;  but  at  any  given  time  the  price  tends  toward 
uniformity  among  all  the  dealers. 

For  the  sake  of  brevity  and  clearness  of  illustration  we 
have  made  use  of  a  perishable  labor-form  in  a  market  in 
which  the  price  may  fluctuate  from  day  to  day,  the  ma- 
terial points  being  that  at  any  given  time  there  is,  in  or- 
dinary circumstances,  but  one  price  in  that  market,  and 
that  that  point  is  fixed,  not  arbitrarily  by  the  sellers  them- 
selves, but  by  the  capable  demand  of  the  lowest  buyers 
whose  participation  is  necessary  to  exhaust  the  supply  in 
the  market.  If  now  we  change  the  illustration  to  some 
article  not  immediately  perishable,  we  shall  find  that  the 
market  price  is  relatively  constant  from  day  to  day,  but 
that  such  changes  of  price  as  may  occur  result  from  the  de- 
mand of  the  most  indifferent,  but  necessary,  buyers. 

This  fact  is  recognized  by  all  merchants,  and  especially 
by  large  dealers  in  a  market  where  competition  among 
sellers  is  close.  They  not  only  strive  to  secure  a  large 
share  of  the  trade  of  those  whose  demand  for  a  given  trade- 
form  is  so  great  that  they  will  buy  it  somewhere  without 
urging — in  which  case  the  question  is  simply  which  mer- 
chant gets  the  trade — but  they  also  constantly  seek  to  at- 
tract buyers  who  are  practically  indifferent.  Full  page  ad- 
vertisements in  metropolitan  dailies,  elaborate  window  dis- 
plays, and  tempting  prices  are  resorted  to  not  only  to  at- 
tract the  man  who  wants  the  goods  in  question,  but  also  to 
create  desire  in  those  who  otherwise  would  not  buy  at  all. 
It  is  not  the  men  and  women  of  wealth  who  drive  to  the 
store  in  fashionable  turnouts  and  are  met  at  the  door  with 
smiles  of  welcome,  followed  with  fawning,  and  dismissed 


84  BIS0CIALI9M— ECONOMICS 

Avith  obsequiousness  and  flattery,  who  fix  the  price  of  staple 
articles;  it  is  the  people  of  small  means  who  are  just  on  the 
verge  of  expending  hard  earned  money  in  some  other  way. 
The  merchant  must  dispose  of  his  entire  stock  on  hand  be- 
fore it  becomes  shopworn,  and  for  this  reason  he  caters 
with  low  prices  to  those  with  whom  it  is  a  matter  of  the 
turning  of  a  hand  whether  or  not  they  will  buy.  The 
marginal  buyer  is  the  determiner  of  price  upon  his  side  of 
the  market. 

The  Marginal  Buyer  of  a  given  trade-form  is  the  most 
indifferent  buyer  whose  participation  is  necessary  to  ex- 
haust the  supply  of  such  trade-form  in  the  market. 

As  in  the  case  of  the  marginal  seller,  the  marginal  buyer 
is  often  but  one  of  a  class  of  buyers  similarly  situated. 
These  buyers  collectively  constitute  the  "marginal  group" 
of  buyers  and  practically  act  as  one  man. 

The  marginal  seller  and  the  marginal  buyer  in  any  mar- 
ket constitute  its  "marginal  pair."  The  marginal  pair  are 
the  determiners  of  market  price  in  normal  conditions.  But 
from  the  fact  that  the  marginal  seller  is  anxious  upon  his 
side  of  the  transaction,  and  the  marginal  buyer  indifferent 
upon  his,  it  necessarily  follows  that  the  preponderating 
tendency  is  toward  the  bid  of  the  marginal  buyer,  and 
consequently  toward  lowness  of  price. 

There  are  economic  forces  behind  each  of  these  factors 
of  market  price,  however,  which  we  can  not  fully  analyze 
until  we  have  considered  the  subject  of  value  and  cost. 
And  there  is  an  economic  fact  of  great  practical  impor- 
tance which  follows  from  what  has  been  said  in  the  fore- 
going discussion,  and  which  will  be  emphasized  by  the 


OF  THE  MARGINAL  PAIR  85 

discussion  of  value  and  cost.  It  is  this:  All  individual 
traders  above  the  margin  in  a  normal  market  arc  bound 
by  prices  fixed  by  forces  outside  themselves.  In  the  ab- 
sence of  some  monopoly  possessed  by  them — which  would 
render  the  market  abnormal — they  do  not  control  the 
market  price,  but  are  controlled  by  it. 

It  must  at  all  times  be  remembered  that  the  marginal 
seller  is  not  merely  the  most  anxious  seller,  and  the  mar- 
ginal buyer  not  merely  the  most  indifferent  buyer.  The 
marginal  seller  must  control  such  a  stock  of  trade-forms  as 
will  affect  the  supply  of  the  market  as  a  whole;  and  the 
marginal  buyer  must  be  a  buyer  who  is  needed  in  the 
given  market  to  exhaust  the  supply.  He  must  have  desire 
enough,  despite  his  indifference,  to  become  an  actual 
buyer.    He  must  evince  an  effective  demand. 

An  examination  of  the  qualif3ing  or  limiting  clauses 
in  the  definitions  of  marginal  seller  and  marginal  buyer 
will  disclose  the  fact  that  the  marginal  seller  must  usually 
be  a  man  of  some  means  in  order  that  his  supply  may  af- 
fect the  entire  market;  while  the  marginal  buyer  may  be 
and  presumably  will  be,  in  most  cases,  a  man  of  compara- 
tively small  means.  In  fact,  the  chances  are  that  the  least 
capable  of  all  the  capable  buyers  will  become  the  marginal 
buyer  in  any  general  market.  These  facts  present  another 
reason  why  tlie  normal  market  is  more  readily  affected 
from  the  side  of  the  buyer  than  that  of  the  seller  with  a 
consequent  tendency  toward  lower  prices.  After  we  have 
considered  the  questions  of  value  and  cost  and  the  problem 
of  ])roduction,  we  shall  be  prepared  to  say  that,  in  a  gen- 
eral market  of  staple  trade-forms  at  least,  in  normal  condi- 


86  BIS0CIALI9M— ECONOMICS 

tions,  the  price  of  trade-forms  already  ii:  the  market  is 
fixed  by  the  lowest  capable  demand  of  the  marginal  buyers. 
"We  shall  also  see  that  this  does  not  controvert  the  fact, 
equally  important  in  its  place,  that  the  further  production 
or  non-production  of  labor-forms  to  he  placed  in  the  mar- 
leet  is  determined  by  their  disutility  to  the  marginal  sel- 
lers. 


CHAPTER  VII. 

OF    VALUE    AND    COST. 

The  question  of  value  is  fundamental.  *  *  *  The  small- 
est error  on  that  subject  infects  with  corresponding  error  all 
our  other  conclusions;  and  anything  vague  or  misty  in  our 
conception  of  it  creates  confusion  and  uncertainty  in  every- 
thing else.  John  Stuart  Mill. 

We  have  already  seen  that  men  may  secure  satisfonns 
in  two  ways;  by  means  of  direct  production,  technically 
called  industry,  and  by  means  of  exchange.  Attending 
each  of  these  modes  there  is  a  certain  disutility.  In  order 
to  distinguish  these  disutilities,  we  have  named  that  at- 
tending the  acquisition  of  the  desired  labor-forms  by  di- 
rect production  industrial  disutility;  and  that  attending 
their  acquisition  by  exchange,  commercial  disutility. 

Of  those  labor-forms  which  are  consumed  by  the  pro- 
ducer and  which,  therefore,  never  actually  acquire  either 
commercial  utility  or  disutility,  the  subject  we  are  pursu- 
ing takes  no  immediate  account.  But  when  a  labor-fonu 
enters  the  market  for  exchange  it  must  be  considered  from 
two  different  points  of  view — that  of  the  seller,  and  that 
of  the  buyer.  From  the  standpoint  of  the  seller  its  signi- 
ficance arises  from  its  commercial  utility;  from  the  stand- 
point of  the  buyer,  from  its  commercial  disutility. 

Let  us  now  recall  to  mind  certain  matters  which  wo  have 
heretofore  discussed,  and  examine  them  more  fully.  TVe 
have  seen  that  men  in  association  are  constantly  develop- 

87 


88  BISOCIALISM— ECONOMICS 

ing  their  desires,  and  as  constantly  seeking  to  satisfy  them 
with  the  least  exertion.  Fitness  to  satisfy  desire  we  have 
designated  utiliiy;  while  that  which  alloys  or  neutralizes 
the  satisfaction  of  desire  we  have  called  disutility.  We 
have  seen  that  while  increase  of  utility  is  the  ultimate  ob- 
ject sought,  the  means  used  are  such  as  diminish  disutility, 
for  only  in  this  way,  in  the  absence  of  monoi^oly,  can  fur- 
ther satisfaction  of  desire  be  had  with  the  same  effort,  or 
equal  satisfaction  be  had  with  less  effort.  We  are  justified, 
therefore,  in  anticipating  the  fact  that  any  inquir}-  into 
normal  conditions  will  be  concerned  with  the  reduction  of 
disutility. 

Although  men,  in  making  exchanges,  may  be  looked 
upon  as  divided  into  buyers  and  sellers,  the  fact  is  that, 
economically  considered,  they  are  both  buyers  and  sellers 
at  one  and  the  same  time.  The  man  who  exchanges  a  coat 
for  a  pair  of  shoes  is  a  seller  as  to  the  coat  and  a  buyer  as 
to  the  shoes.  And  if  he  sells  the  coat  for  mone}^,  and  with 
that  buys  shoes,  the  effect  is  the  same.  So  in  every  trans- 
action between  merchant  and  customer  there  is  upon  one 
side  of  the  counter  a  seller-buyer,  and  upon  the  other  side  a 
buyer-seller.  This  is  plain  enough  when  the  customer  ex- 
changes country  produce  for  dry  goods;  but  if  he  sells  his 
produce  for  cash,  and  with  the  money  buys  the  dry  goods, 
the  intervening  step  is  likely  to  mislead  us.  This  likeli- 
hood is  increased  by  the  fact  that  we  are  prone  to  attribute 
to  money  some  mysterious  and  peculiar  utility,  instead  of 
looking  upon  it  as  the  equivalent,  in  concentrated  and  cur- 
rent form,  of  the  commercial  utility  of  that  for  which  it  is 
received,  or  for  which  it  is  paid.     This  tendency  toward 


OF  VALUE  AND  COST  8'.) 

mystery  is  increased  by  the  fact  that  the  money  we  use  has 
been  given  a  peculiar  and  artificial  utility  by  law. 

As  a  seller  each  man  is  interested  directly  and  imme- 
diately in  the  commercial  utility  of  his  trade-form,  the 
disutility  of  its  acquisition  being  to  him  a  thing  of  the 
past.  As  a  buyer  each  man  is  interested  directly  and  im- 
mediately in  the  commercial  disutility  to  himself  of  the 
seller's  trade-form,  its  utility  being  to  the  buyer  a  thing 
of  the  future.  The  seller  desires  that  the  trade-form  in 
question  should  have  for  him  great  commercial  utihty; 
the  buyer  desires  that  it  should  have  for  him  small  com- 
mercial disutility.  The  attention  of  each  is  centered  upon 
the  point  of  exchange,  which  to  both  is  the  market  price 
of  the  trade-form.  But  the  market  price,  although  the 
same  for  both,  means  vastly  different  things  to  them.  To 
the  seller  the  market  price  represents  the  commercial  util- 
ity to  him  of  the  thing  sold.  The  difference  between  this 
commercial  utility  and  the  disutility  of  acquiring  the  thing 
sold  represents  its  positive  utility  to  the  seller.  Later  we 
shall  discuss  and  define  this  positive  utility  as  net  value. 
To  the  buyer  market  price  represents  the  commercial  dis- 
utility of  the  thing  bought.  The  difference  between  this 
commercial  disutility  and  the  disutility  to  him  of  direct 
production  represents  a  saving,  i.  e.,  an  avoidance,  of  dis- 
utility which  we  shall  later  discuss  and  define  as  net  sal- 
vage. 
■  We  learned  in  our  discussion  of  utility  and  disutility 
that  in  their  entireties  utilities  can  not  be  measured.  If  a 
man  produces  a  certain  lalior-form,  as,  for  instance,  a  coat, 
it  may  have  for  him  but  one  kind  of  utilitv.    If  he  be  our 


90  BISCX3IALI&M— ECONCWVIICS 

Selkirk  alone  upon  an  island,  its  only  utility  is  that  of  a 
satisfonn.  He  has  in  his  consciousness,  if  not  in  his  imme- 
diate possession,  some  labor-form  which  has  for  him  but 
one  imit  of  positive  utility — his  marginal  labor-form.  By 
means  of  this  unit  he  may  compare  the  coat  with  other 
labor-forms  and  determine  which  he  esteems  most  and 
the  order  in  which  he  esteems  them.  But  he  can  not 
measure  the  absolute  utility  of  the  coat.  On  a  bright, 
sunny  day  it  might  at  first  have  practically  no  present 
utility;  while  within  a  few  hours  it  might  so  protect  him 
from  a  storm  and  its  attendant  chill  as  to  save  his  life.  As 
a  mere  satisform  he  may  know  that  he  esteems  it  greatly 
or  but  little,  but  Just  how  much  actual  utility  it  may  have 
for  him  he  can  not  tell. 

If  Selkirk  now  produces  a  rude  ax,  the  utility  of  this  la- 
bor-form will  be  that  of  an  aid-form.  The  utility  to  him  will 
be  great,  but  he  can  not  measure  its  utility  as  aid-form  any 
more  than  he  can  measure  the  utility  of  the  satisforms  in 
the  production  of  which  the  ax  is  used.  To  Selkirk  alone  up- 
on his  island  the  utilities  of  all  labor-forms  are  indefinable 
at  the  upper  limit.  They  are  comparable  with  the  one 
at  the  lower  limit — the  marginal  labor- form — and  through 
it  with  one  another,  but  as  there  is  nothing  definitely  to 
fix  the  upper  limit,  no  measurement  of  their  entire  utilities 
is  possible;  for  measurement  involves  not  only  a  starting 

point  and  a  measuring  unit,  but  also  a  point  to  which  to 
measure. 

Let  us  now  assume  that  after  Selkirk  has  returned  to 

civilization  he  produces  a  labor-form  as  at  first — a  coat — 

and  goes  with  it  into  the  open  market.     Its  distinctive 


OF  VALUE  AND  COST  91 

utility  to  him  will  now  be  that  of  a  trade-form ;  its  utility 
to  him  as  a  seller  in  the  market  will  be  commercial.  This 
utility  may  be  measured  and  accurately  so,  if  we  secure 
a  proper  unit  of  measurement,  since  its  upper  limit  is  the 
poijit  of  exchange  and  its  lower  limit  the  point  of  dis- 
utility.  Between  these  two  points  is  a  definite  utility  which 
stops  short,  and,  it  may  be,  far  short  of  its  total  utility. 

In  every  civilized  community  there  is  a  common  margi- 
nal unit  of  utility.  It  is  the  labor-form  having  the  least 
utility  which  men  in  general  will  exert  themselves  to  ac- 
quire. This  common  marginal  labor-form  is  typified  by 
the  lowest  current  coin — in  the  United  States  a  one-cent 
piece.  For  unless  a  labor-form  is  worth  one  cent,  it  is, 
in  general,  not  worth  producing  for  the  market.  In  the 
case  of  those  few  labor-forms  which  sell  in  the  market  at 
two  or  more  for  one  cent,  the  group  which  so  sells  may  be 
considered  as  a  whole,  and  as  a  marginal  labor-form.  The 
fact  that  the  cent  is  the  lowest  coin  shows  that  in  the  gen- 
eral market  it  represents  the  marginal  labor-form;  the 
market,  like  the  law,  takes  no  note  of  trifles. 

In  practical  business,  however,  one  hundred  cents,  or 
one  dollar,  is  treated  as  the  unit  of  trade.  Custom  in  this 
regard  has  ripened  into  law,  and  for  the  present  we  may 
adopt  the  customary  and  legal  unit  for  the  measurement  of 
all  utility  which  bears  a  definite  and  determinable  rela- 
tion to  the  common  marginal  unit  of  utility.  We  have, 
therefore,  in  respect  to  utility,  when  commercial  in  form, 
a  unit  of  measurement,  a  point  from  which  to  measure, 
and  a  point  to  which  to  measure.  "We  now  have  need  of  a 
distinctive  term  which  will  express  utility  when  measured; 


92  BISOCIALISM— ECONOMICS 

that  is,  which  will  express  measurable  utility,  commercial 
in  form,  determined  in  the  market  at  the  point  of  ex- 
change. For  in  the  absence  of  an  exchange,  actual  or 
potential,  to  determine  the  point  of  upper  limit  no 
measurement  is  possible.  And  this  measurable  utility  is 
not  a  common  or  general  utility,  but  a  utility  limited  to 
the  possessor  as  a  seller  in  the  market.  Xot  only  that,  but 
as  we  shall  see,  the  utility  to  the  seller  of  a  given  labor- 
form  is  equal,  when  expressed  in  price,  to  its  disutility  to 
the  buyer. 

These  elements  are  all  comprehended  in  the  terms  com- 
mon marginal  unit  of  utility,  measurable  utility  and  value, 
which  we  now  define,  together  with  the  term  immeasurable 
utility. 

The  Common  Marginal  Unit  of  Utility  is  the  labor-form 
having  the  least  utility  which  men  in  general  will  exert 
themselves  to  acquire,  as  typified  by  the  lowest  current 
coin. 

Measurable  Utility  is  any  utility  so  circumstanced  that 
it  bears  a  definite  and  determinate  relation  to  the  common 
marginal  unit  of  utility. 

Value  is  measurable  utility  at  the  point  of  exchange. 

Immeasurable  Utility  is  any  utility  so  circumstanced 
that  it  bears  an  indefinite  and  indeterminate  relation  to 
the  common  marginal  unit  of  utility. 

Value  is  always  limited  and  measured  by  the  point  of 
exchange  which  is  fixed  in  a  general  market,  not  by  the 
total  utility  of  the  thing  sold,  but  by  its  utility  to  the  mar- 
ginal pair,  particularly  the  marginal  buyer.  We  have  also 
seen  that  the  utility  of  a  labor-form  is  neutralized  more  or 


OF  VALUE  AND  COST  93 

less  by  the  disutility  of  its  acquisition.  Its  value,  there- 
fore, takes  on  two  forms — the  negative  and  the  positive. 
To  the  extent  of  its  disutility  its  value  is  negatived  or 
canceled,  and  it  is  only  above  the- point  to  which  the  dis- 
utility extends  that  there  is  a  positive  value  to  the  seller. 
Thus,  if  a  man  produces  a  labor-form  at  a  disutility  which 
may  be  represented  by  five  dollars,  and  sells  it  in  the 
market  for  ten  dollars,  the  ten  dollars  represent  the  total 
measurable  utility  to  him  of  the  labor-form  at  the  point 
of  exchange,  or,  in  other  words,  its  value.  But  its  value 
is  not  all  gain.  It  covers  the  disutility  of  production  plus 
the  net  gain  of  the  transaction.  The  disutility  of  produc- 
tion neutralizes  the  value  to  that  extent,  and  leaves  only 
a  portion  of  the  total  value  as  a  positive  gain. 

We  have  already  learned  that  some  utilities,  like  those 
of  the  air  and  sunshine  in  ordinary  circumstances,  are 
spontaneous  and  require  no  irksome  effort  upon  the  part 
of  men  to  acquire  them;  that  men,  by  invention,  division  of 
labor,  exchange,  etc.,  strive  to  lessen  disutility  and  to  at- 
tain spontaneity  in  the  acquirement  of  satisforms;  and 
that,  if  this  were  possible,  the  point  of  positive  utility 
would  be  lowered  until  it  would  fall  below  the  point  of  dis- 
utility. If  the  point  of  disutility  were  reached  and  passed 
in  any  case,  both  value  and  disutility  would  disappear,  and 
not  till  then.  Value  and  disutility,  therefore,  both  begin 
at  the  point  of  disutility.  They  extend  upward  together, 
the  disutility  canceling  the  value,  until  the  point  of  posi- 
tive utility  is  reached,  while  value  alone  continues  to  the 
point  of  exchange. 

If,  now,  we  conceive  the  value  of  a  labor-form  to  be  rep- 


94  BISOCIALISM— ECONOMICS 

resented  by  a  vertical  line,  we  have  three  points  which 
must  be  kept  constantly  in  mind.  They  are,  first,  the 
point  of  disutility,  which  marks  the  lower  limit  of  both 
value  and  disutility;  second,  the  point  of  positive  utility, 
which  marks  the  upper  limit  of  disutility;  and,  third,  the 
point  of  exchange,  which  marks  the  upper  limit  of  value. 
In  order  that  we  may  distinguish  between  disutility  to 
the  seller  and  disutility  to  the  buyer,  and  also  between 
value  and  that  coincident  disutility  to  the  seller  which 
negatives  value,  two  new  terms  become  necessary.  We 
shall  call  disutility  to  the  seller,  or  the  negation  of  value, 
disvalue;  and  the  positive  value  which  lies  between  the 
point  of  positive  utility  and  the  point  of  exchange,  net 
value. 

Disvalue  is  the  disutility  to  the  seller  of  acquiring  the 
thing  sold. 

Net  Value  is  the  excess  to  the  seller  of  value  over  dis- 
value. 

Let  the  line  ABODE,  extending  indefinitely 
as  indicated  by  the  dotted  extremities,  represent 
the  immeasurable  total  utility  of  a  given  labor- 
form  at  a  given  time  and  place.  Let  A  represent 
the  point  of  spontaneity,  B  the  point  of  disutility, 
C  the  point  of  positive  utility,  and  D  the  point  of 
exchange.  Then  the  definite  dark  portion  of  the 
line  extending  from  B  to  C  represents  the  dis- 
value; the  definite  light  portion  extending  from 
C  to  D  represents  the  net  value;  and  the  total 
B  definite  portion  of  the  line  extending  from  B  to 

.         i      D  represents  the  value  of  the  labor-form. 


E 


OF  VALUE  AND  COST  96 

A  man  who  has  produced  or  acquired  trade-forms  for 
the  market  is  interested,  primarily,  in  their  net  value.  In 
order  that  this  may  be  as  great  as  possible  he  strives  to 
enlarge  it  at  both  the  upper  and  lower  limit.  In  order  to 
attain  these  ends,  he  becomes  interested,  secondarily,  in 
market  price  and  in  disvalue,  seeking  to  increase  the  one 
and  to  decrease  the  other.  These  constitute  practical  prob- 
lems of  business  life.  We  must  defer  their  consideration 
for  the  present,  however,  and  take  ujd  a  more  extended 
examination  of  the  market — and  this  time  from  the  point 
of  view  of  the  buyer. 

To  the  buyer  the  market  price  represents  the  commer- 
cial disutility  to  him  of  the  thing  bought;  its  disutility  is 
the  disutility  of  acquiring  the  price,  instead  of  the  dis- 
utility of  acquiring  the  thing  itself  directly  by  labor.  Thus, 
a  man  may  produce  a  pair  of  shoes  and  sell  them  for  five 
dollars,  with  which  sum  he  may  buy  a  coat  which  he  could 
make  at  first  hand  only  at  a  disutility  of  ten  dollars.  To  the 
buyer  the  difference  between  the  disutility  of  acquiring  the 
price  and  the  disutility  of  acquiring  the  thing  itself  direct- 
ly by  labor  represents  a  saving — an  avoidance — of  dis- 
utility. This  saving  of  disutility  in  turn  results  in  an  in- 
crease in  positive  utility.  It  is  to  secure  this  resulting  in- 
crease of  utility,  through  the  saving  of  disutility,  that  all 
exchanges  are  made  upon  the  part  of  the  buyer. 

"We  learned  in  our  discussion  of  utility  and  disutility 
that  the  marginal  labor-form  of  any  indi\ddual  is  his  unit 
of  comparison  not  only  of  utility,  but  of  disutility;  also, 
that  the  marginal  lal)()r-form  has  one  and  but  one  unit  of 
disutility.     For  unle-s  it  had  at  least  one  unit  of  disutilitv, 


96  BISOCIALISM— ECONOMICS 

its  utility  would  be  spontaneous,  and  no  effort  would  be 
made  to  secure  it;  and  if  it  had  two  units  of  disutility,  the 
second  unit  would  neutralize  its  only  unit  of  utility,  and 
its  utility  becoming  indifferent,  no  effort  would  be  made 
to  produce  it. 

In  the  United  States  the  real  marginal  unit  of  disutility 
is  one  cent.  Labor  that  is  not  of  the  disutility  of  one  cent 
either  will  not  be  exerted  at  all,  or  it  will  ordinarily  be 
exerted  gratuitously.  Custom  and  law,  however,  having 
fixed  upon  one  hundred  cents,  or  one  dollar,  as  the  unit 
of  commerce,  we  may  for  the  present  treat  this  as  the  prac- 
tical common  marginal  unit  of  disutility.  All  disutility 
has  its  lower  limit  at  the  point  of  disutility.  Commercial 
disutility  is  determined  by  market  price,  and  its  upper  limit 
is  fixed  by  the  point  of  exchange.  "We  have,  therefore,  with 
respect  to  disutility,  commercial  in  form,  a  unit  of  measure- 
ment, a  point  from  which  to  measure,  and  a  point  to  which 
to  measure.  We  now  have  need  of  a  term  which  will  express 
commercial  disutility  when  measured,  that  is,  which  will 
express  measurable  disutility,  commercial  in  form,  deter- 
mined in  the  market  at  the  point  of  exchange.  For  in  the 
absence  of  an  exchange,  actual  or  potential,  to  determine 
the  point  of  disutility  to  the  buyer,  no  measurement  is 
possible.  And  this  measurable  disutility  is  not  a  common 
or  general  disutility,  but  a  disutility  limited  to  the  buyer; 
for  the  disutility  to  the  buyer  is  determined  by  price, 
which  also  determines  the  utility  of  the  same  trade-form 
to  the  seller. 

These  elements  are  all  comprehended  in  the  terms  covi- 
mon  marginal  vnit  of  disutility,  measurable  disutility  and 


OF  VALUE  AND  COST  97 

cost  as  we  shall  now  define  them,  together  with  the  term 
immeasvrahle  disutility. 

The  Common  Marginal  Unit  of  Disutility  is  the  irksome- 
ness  of  attaining  the  least  valuable  labor-form  which  men 
in  general  will  exert  themselves  to  acquire,  as  typified  by 
the  lowest  current  coin. 

Measurable  Disutility  is  any  disutility  so  circumstanced 
that  it  bears  a  definite  and  determinate  relation  to  the  com- 
mon marginal  unit  of  disutility. 

Cost  is  measurable  disutility  at  the  point  of  exchange. 

Immeasurable  Disutility  is  any  disutility  so  circum- 
stanced that  it  bears  an  indefinite  and  indeterminate  re- 
lation to  the  common  marginal  unit  of  disutility. 


CHAPTER  VIII. 

OF   THE   SOCIALIZATION   OF   UTILITY, 

The  constant  striving  of  economic  progress  is  toward 
taking  commodities  out  of  the  categories  of  values,  and  mak- 
ing them  utilities  like  the  rain  and  sunshine. 

William  Smart. 

A  man  may  buy  trade-forms  to  use  for  the  direct  satis- 
faction of  his  desires,  to  use  productively,  or  to  sell  again. 
In  the  first  case  the  trade-forms  become  satisforms  and 
their  distinctive  utility  ceases  to  be  commercial.  In  the 
second  case  they  become  aid-forms  and  their  cost  becomes 
an  element  of  the  disvalue  of  the  trade-forms  produced  by 
their  aid.  If  the  trade-forms  are  bought  to  be  sold  again, 
they  remain  trade-forms,  and  their  cost  becomes  disvalue 
to  the  owner  as  a  prospective  seller. 

The  buyer  deals  distinctively  with  measurable  utility. 
He  has  the  alternative  of  buying  or  of  producing  at  first 
hand  whatever  he  may  need.  This  applies,  in  strictness, 
only  to  those  labor-forms  which  can  be  made  by  one  man 
working  alone  with  ordinary  appliances.  But  in  a  complex 
system  of  industry  and  exchange  in  which  it  is  impossible 
for  any  buyer  with  his  own  labor-power  and  simple  facili- 
ties to  produce  a  given  satisform,  the  alternative  shifts 
from  total  to  partial  production.  A  buyer  has  the  choice 
of  working  at  one  trade  or  at  another — of  following  one 
profession    or   another — in    securing   the    trade-forms    or 

98 


OF  THE   SOCIAUZATION  OF  UTILITY  99 

money-forms  which  he  proposes  to  use  in  exchange.  In 
any  case  the  disutility  of  the  direct  means  of  acquisition  is 
distinguishable  from  the  indirect,  and  each  may  be  meas- 
ured in  terms  of  money.  It  is  as  easy  to  determine  how- 
much  more  a  man  can  make  at  one  trade  or  emplo}Tnent 
than  another  as  it  is  to  determine  how  much  more  a  given 
labor-form  will  cost  if  made  at  first  hand  than  if  purchased 
in  the  market.  The  utility  gained  by  the  saving  of  dis- 
utility through  exchange  is  a  measurable  utility.  It  rep- 
resents the  saving  which  results  from  regular  rather  than 
shifting  occupation  and  employment.  It  lies  between  cost 
and  alternative  cost — ibetween  the  point  of  exchange  and 
what  we  shall  call  the  point  of  alternative  cost. 

The  Alternative  Cost  of  a  labor-form  is  that  cost  which 
would  be  necessitated  by  the  direct  processes  of  industry, 
if  there  were  no  saving  of  disutility  by  the  indirect  proc- 
esses of  exchange. 

Between  the  point  of  exchange  and  the  point  of  alter- 
native cost  lies  that  utility  gained  by  the  buyer  through 
the  saving  of  disutility  and  which  we  shall  call  his  net  sal- 
vage. 

Net  Salvage  is  the  saving  to  the  buyer  of  cost  over  al- 
ternative cost. 

The  Point  of  Alternative  Cost  is  the  point  where  net  sal- 
vage ends  and  measureless  utility  begins. 

Net  value  and  net  salvage  are  very  different  things,  yet 
they  have  certain  features  in  common.  Both  may  be  ex- 
pressed in  terms  of  money.  Both  may  be  reflected  in  land 
values — a  fact  hitherto  overlooked — as  we  shall  see  when 
we  discuss  the  question  of  ground  rent.    Because  of  these 


100  BISOCIALISM— ECONOMICS 

facts  the  one  may  become  commercially  equivalent  to  the 
other,  but  not  identical  with  it  in  any  respect. 

It  will  be  noted  that  value,  disvalue  and  net  value  per- 
tain to  capital-forms;  while  cost,  alternative  cost  and  net 
salvage  pertain  to  satisfonns,  it  being  remembered  that 
cost  becomes  disvalue  to  the  merchant  who  buys  to  sell 
again,  or  to  the  manufacturer  who  buys  raw  or  unfinished 
materials  for  use  in  his  business.  Value  and  cost  in  their 
economic  sense  are  manifested  only  at  the  point  of  ex- 
change; but  the  exchange  need  not  be  of  the  particular 
thing  in  question,  if  it  be  of  one  of  a  class  of  things  which 
sell  at  a  common  price  in  the  market.  For  instance,  it  is 
not  necessary  to  exchange  a  particular  bushel  of  wheat  in 
the  market  in  order  to  ascertain  its  value,  for  in  the  same 
market  all  bushels  of  wheat  of  the  same  grade  are  economic 
equivalents. 

Economic  Equivalents  are  things  which  exchange  for 
each  other,  or  at  the  same  price,  at  any  given  time  in  the 
same  market. 

It  will  be  noted,  also,  that  while  value  is  a  term  appli- 
cable only  to  the  seller,  and  cost  a  term  applicable  only  to 
the  buyer,  yet  in  any  given  case  value  and  cost  meet  in 
price  at  the  point  of  exchange.    That  is  to  say: 

Price  is  the  measure,  in  terms  of  money  of  either  value 
or  cost,  according  to  the  point  of  view. 

As  was  anticipated  in  the  last  chapter,  we  have  now 
shown  that  all  the  economic  forces  which  center  in  the 
market  are  composed  and  measured  in  market  price. 
Value  is  the  resultant  of  the  composition  of  these  forces, 


OF  THE   SOCIALIZATION  OF  UTILITY  101 

and  cost  is  its  exact  ec^uilibrant  in  every  case.    Economic 
Science  is  thus  demonstrated  to  be  a  true  science. 

We  may  now  formulate  a  definition  of  the  point  of  ex- 
change. Like  price,  it  has  a  double  aspect  which  must  be 
recognized  by  definition  and  kept  well  in  mind. 

The  Point  of  Exchange  is  the  point  where  net  value  to 
the  seller  ends  and  net  salvage  to  the  buyer  begins. 

Let  the  line  ABODE,  extending  indefinitely 
as  indicated  by  the  dotted  extremities,  represent 
the  immeasurable  total  utility  of  a  given  labor- 
form  at  a  given  time  and  place.  Let  A  represent 
the  point  of  spontaneity,  B  the  point  of  disutil- 
ity, C  the  point  of  exchange,  D  the  point  of  alter- 
native cost,  and  E  the  indefinite  and  indetermi- 
nate point  of  immeasurable  utility.  Then  C  also 
D  represents  the  point  of  disutility  to  the  buyer. 

The  definite  dark  portion  of  the  line  extending 
from  B  to  C  represents  commercial  disutility  to 
the  buyer  at  the  point  of  exchange,  or  cost.  The 
definite  light  portion  C  D  represents  disutility 
saved  to  the  buyer,  or  net  salvage.  The  entire 
definite  line  from  B  to  D  represents  measurable 
utility;  and  that  portion  of  the  line  extending 
from  D  indefinitely  upwards  to  the  indeterminate 
point  E  represents  immeasurable  utility  of  the 
labor-form. 

We  have  called  the  point  of  disutility  the  economic 
Btarting  point,  and  the  point  of  positive  utility  the  eco- 
nomic zero  point.  The  point  of  exchange  is  the  economic 
meeting  point;  there  value  and  cost  meet  in  market  price 


102  BISOCIALISM— ECONOMICS 

and  are  both  expressed  in  terms  of  current  money.  The 
point  of  alternative  cost,  being  the  upper  limit  of  measur- 
able utility,  is  the  economic  stopping  point.  Beyond  it 
our  inquiry  can  not  go.  The  point  of  immeasurable  utility 
is  an  indeterminate  point  which,  for  the  sake  of  conveni- 
ence, we  merely  assume  to  exist;  it  has  no  definite  reality. 

In  the  diagram  shown  in  the  last  chapter  the  net  value 
or  positive  gain  to  the  seller  is  measured  by  the  light  line 
C  D.  In  the  above  diagram  the  net  salvage,  or  negative 
gain  to  the  buyer,  is  measured  by  the  light  line  C  D. 
These  gains  may  or  may  not  be  equal.  As  long  as  each  line 
C  D  represents  at  least  one  unit  of  utility  gained,  positive 
or  negative,  as  the  case  may  be,  the  corresponding  trader 
is  capable,  and  an  exchange  is  economically  possible. 

We  have  indicated  by  alternative  cost  the  disutility 
which  would  be  required  to  secure  a  given  satisfonn  by 
direct  production.  Between  the  point  of  exchange  and  the 
upper  limit  of  alternative  cost  lies  an  utility  which  is  saved 
to  the  buyer  by  the  process  of  exchange.  This  gain,  how- 
ever, is  not  limited  to  the  individual  buyer.  By  the  law 
of  the  market  the  point  of  exchange  is  fixed  not  by  the 
parties  to  a  particular  purchase  and  sale,  but  by  the  mar- 
ginal pair.  The  marginal  buyer  fi^es  the  price  in  so  far 
as  it  is  affected  from  his  side  of  the  market,  and  all  other 
buyers  participate  in  the  gain  by  buying  at  the  same  price. 
In  the  open  market,  in  normal  conditions,  no  man  can  live 
unto  himself,  either  as  seller  or  buyer,  producer  or  con- 
sumer. If  any  man  acquires  a  mastery  over  any  disutility 
of  matter,  time  or  space,  other  men  are  led  to  acquire  the 
same  mastery,  or  its  economic  equivalent  in  other  direc- 


OF  THE   SOCIALIZATION  OF  UTILITY  103 

tions;  and  in  the  regular  course  of  exchange,  in  the  ab- 
sence of  monopoly,  the  market  price  of  all  labor-forms 
tends  to  fall,  thus  lessening  cost  to  all  as  consumers.  With 
every  fall  in  price  the  difference  between  cost  and  alterna- 
tive cost  is  increased  for  the  entire  community,  and  the 
spontaneity  of  nature  is  to  that  extent  more  nearly  ap- 
proached by  all.  Such  an  increased  enjoyment  of  utility 
by  the  entire  community,  brought  about  by  saving  dis- 
utility and  distributing  the  resulting  benefits  to  all 
through  the  processes  of  exchange,  we  shall  call  the  so- 
cialization of  utility. 


CHAPTER  IX. 

OF  MEASURABLE  UTILITY  AND  DISUTILITY. 

Value  is  the  calculation-form  of  utility. 

F.  von  Wieser. 

In  matters  of  philosophy  and  science  authority  has  ever 
been  the  great  opponent  of  truth.  A  despotic  calm  is  the 
triumph  of  error.  W.  S.  Jevons. 

It  must  be  remembered  that  commercial  utility  is  but  a 
form  of  intermediate  utility,  and  that  this  again  is  but  a 
form  of  relative  utility.  The  remaining  portion  of  inter- 
mediate utility,  viz.,  industrial  utility,  is  readily  reducible 
to  the  commercial  form,  and  at  some  stage  of  its  existence 
usually  passes  through  it.  Aid-forms  are  now  seldom  made 
by  those  who  actually  employ  them  in  industry,  but  are 
manufactured  by  others  and  placed  upon  the  market  as 
trade-forms.  After  passing  through  one  or  more  ex- 
changes, in  each  of  which  their  commercial  utility  is  pri- 
mary, and  their  future  industrial  utility  merely  a  circum- 
stance which  gives  them  their  importance  in  the  market, 
they  become  instruments  of  industry,  and  their  primary 
utility  becomes  industrial.  A  similar  transformation  is 
possible,  though  not  so  usual,  in  the  case  of  other  relative 
utilities.  Ultimate  utilities  may  at  any  time  be  transferred 
to  the  category  of  intermediate  utilities,  since  all  satisforms 
of  consequence  may  be  put  upon  the  market,  and  so  be 
changed  into  capital-forms.  Commercial  utility,  with  its 
adjuncts,  money  and  market  price,  furnishes,  therefore, 

104 


MEASURABLE  UTILITY   AND  DISUTILITY        105 

a  common  denominator  to  which  all  relative  utilities  may 
be  reduced,  and  thus  subjected  to  measurement. 

In  like  manner  commercial  disutility  is  but  a  form  of 
relative  disutility.  The  remaining  portion  of  relative  dis- 
utility, viz.,  industrial  disutility,  is  readily  reducible  to  the 
commercial  form,  and  in  modern  methods  of  production 
usually  passes  through  it  in  the  form  of  wages  of  labor.  So 
true  is  this  that  in  those  cases,  now  comparatively  rare, 
in  which  a  given  person  acquires  a  satisform  entirely  by  his 
own  industry,  without  exchange,  he  measures  this  disutility 
in  terms  of  wages  paid  in  the  open  market  for  similar  effort. 
He  gauges  his  effort,  not  by  its  own  industrial  disutility, 
but  by  the  commercial  disutility  of  a  known  economic 
equivalent. 

Measurable  utility  in  the  hands  of  the  seller  is  mani- 
fested as  value,  and  is  limited  by  the  point  of  exchange; 
but  there  is  another  form  of  measurable  utility  which 
manifests  itself  as  net  salvage  to  the  buyer,  and,  lying 
above  the  point  of  exchange,  is  limited  only  by  the  point 
of  alternative  cost,  that  is,  by  the  limit  of  measurable  util- 
ity itself.  On  the  other  hand,  all  disutility  is  not  in  the 
form  of  cost  to  the  buyer;  there  is  a  disvalue  associated 
with  every  value  in  the  hands  of  the  seller.  So  that  both 
measurable  utility  and  measurable  disutility  appear  upon 
both  sides  of  the  market  in  every  exchange.  It  is  of  these, 
and  these  alone,  that  Economics  seeks  to  know  the  natural 
laws. 

By  means  of  the  foregoing  analyses  and  illustrations  we 
find  that  while  commercial  utility  and  commercial  dis- 
utility arc  the  only  forms  in  which  measurement  actually 


106  BISOCIALISM— ECONOMICS 

takes  place,  all  relative  utilities  and  disutilities  are  meas- 
urable by  reduction  to  the  commercial  form;  and  that  all 
forms  of  utility  and  disutility  other  than  the  relative 
forms  are  immeasurable.  This  gives  us  the  fundamental 
economic  classification  of  utilities  and  disutilities  into 
those  which  are  measurable  and  those  which  are  im- 
measurable. 

It  will  be  remembered  that  the  same  labor-form  which 
furnishes  the  marginal  unit  of  utility  also  furnishes  the 
marginal  unit  of  disutility. 

All  measurable  utilities  and  disutilities  are  within  the 
province  of  Economic  Science;  all  immeasurable  utilities 
and  disutilities  are  without  its  province.  A  complete  dis- 
cussion of  Economic  Science  involves  a  study  of  Eco- 
nomics and  Political  Economy.  These  both  treat  of  meas- 
urable utilities  and  disutilities — and  of  these  only — but 
from  different  points  of  vicAv.  x\ll  measurable  utilities  are 
manifested  in  the  market  as  value  and  net  salvage;  all 
measurable  disutilities  as  disvalue  and  cost. 

Economic  Science  is  that  science  which  treats  of  meas- 
urable utilities  and  disutilities. 

Economics  is  that  branch  of  Economic  Science  which 
treats  of  measurable  utilities  and  disutilities  in  so  far  as 
they  are  unaffected  by  juridical  institutions,  laws  or  cus- 
toms. 

Political  Economy  is  that  branch  of  Economic  Science 
which  treats  of  measurable  utilities  and  disutilities  in  so 
far  as  they  are  affected  by  juridical  institutions,  laws  or 
customs. 

The  following  outline  will  give  a  graphic  view  of  our 


§•3 

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t) 

t) 

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S          2'- 

a             ■:;  "       CO 

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m         —  ^  t.      — 

2               13  —  <u           O 

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2     :?  'S  a    a 

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5 


108  BISOCIALISM— ECONOMICS 

entire  discussion  up  to  this  point,  and  will  assist  the  reader 
to  fix  in  mind  in  simple  form  the  analysis  which  results  in 
measurable  utility  and  disutility,  and  the  synthesis  which 
determines  the  scope  of  Economic  Science  and  its 
branches,  Economics  and  Political  Economy.  The  sub- 
division of  disutility  into  absolute  and  relative  disutility 
is  shown  in  inverse  order  as  compared  with  the  corre- 
sponding subdivision  of  utility,  thus  showing  the  negative 
or  opposite  character  of  disutility,  and  at  the  same  time 
throwing  the  terms  which  are  involved  in  Economic  Sci- 
ence together  in  the  main  body  of  the  outline.  Those 
forms  of  utility  and  disutility  which  we  have  discarded 
as  not  pertinent  to  Economic  Science  are  shown  in  italics. 

Although  value  is  not  the  whole  of  measurable  utility — 
net  salvage  being  its  complement — it  is  its  most  impor- 
tant part  inasmuch  as  net  salvage  must  become  the  eco- 
nomic equivalent  of  value  in  order  to  be  measured.  It  is, 
therefore,  of  interest  as  well  as  of  importance  that  we  now 
compare  value  as  we  have  elaborated  and  defined  it  with 
value  as  elaborated  and  defined  by  standard  writers  upon 
economic  subjects.  Nearly  all  such  writers  have  at- 
tempted a  formal  statement  of  the  requisites  of  value,  and 
have  usually  held  with  John  Stuart  Mill  that  in  order  to 
possess  value  a  thing  must  have  utility  and  must  also  be 
difficult  of  attainment;  or,  as  is  sometimes  stated,  it  must 
be  both  useful  and  relatively  scarce.  This  is  practically 
the  same  as  saying  that  it  must  have  both  utility  and  dis- 
utility. 

Our  discussion  has  carried  us  far  beyond  this  distinc- 
tion, and  has  led  us  to  analyze  the  utility  which  is  capable 


MEASURABLE  UTILITY  AND  DISUTILITY         109 

of  producing  value.  In  order  to  result  in  value,  according 
to  our  analysis,  the  utility  of  the  thing  in  question  must 
be  not  only  onerous  as  distinguished  from  spontaneous;  it 
must  be  relative — not  absolute — and  it  must  assume  a 
commercial  form  so  as  to  fit  it  for  measurement  by  the 
common  marginal  unit  of  utility.  This  classification  of 
the  utilities  which  result  in  value  furnishes  an  infallible 
test  in  that  regard  and  avoids  the  mistiness  created  by 
Adam  Smith's  unfortunate  classification  of  -value  into 
"value  in  use"  and  "value  in  exchange."  Value  in  use, 
so-called,  is  simply  utility,  and  does  not  necessarily  have 
the  slightest  relation  to  value  at  all ;  while  the  term  "value 
in  exchange"  is  inexcusably  tautological,  as  value  is  im- 
possible in  the  absence  of  actual  or  potential  exchange.  If 
it  be  once  thoroughly  understood  and  then  well  remem- 
bered that  utility  does  not  result  in  value  unless  it  is 
onerous  in  its  origin,  relative  in  its  intensity,  and  com- 
mercial in  its  form,  no  further  analysis  is  necessary,  as 
these  terms  comprise  all  the  requisites  as  to  utility,  and 
the  term  "onerous"  also  implies  the  requisite  of  disutility. 
The  mistiness  which  has  enveloped  the  requisites  of 
value  has  also  obscured  the  perceptions  of  men  as  to  the 
nature  and  functions  of  value  itself.  The  early  writers  in 
every  field  of  inquiry  have  been  misled  by  appearances, 
and  have  failed  to  recognize  necessary  and  fundamental 
distinctions.  The  writers  upon  economic  subjects  form  no 
exception  to  this  rule.  Adam  Smith  took  a  superficial 
view  of  the  phenomenon  of  value  and  gave  to  the  world 
the  idea  that  value,  i.  e.,  what  he  called  "value  in  ex- 
change," is  power — "purchasing  power." 


110  BISOCIALISM— ECONOMICS 

Never  was  a  mistake  more  grievously  made  or  more  tena- 
ciously adhered  to  by  subsequent  writers  than  this.  The 
idea  that  value  is  "purchasing  power"  runs  through  nearly 
all  the  current  treatises  on  Political  Economy,  and  many 
of  them  bluntly  define  value  as  purchasing  power.  Some 
writers  speak  of  this  power  as  if  it  were  something  inherent 
in  the  object  itself,  and  could  reach  out  and  do  something 
in  the  process  of  exchange — for  "power"  denotes  ability  to 
act  or  to  do.  On  the  other  hand,  there  prevails  a  notion, 
countenanced  by  many  of  those  high  in  authority,  that 
value  is  a  sort  of  force  like  gravity  or  magnetism  which 
draws  desired  commodities  to  the  possessor  of  the  valuable 
thing,  as  bodies  are  drawn  toward  the  center  of  the  earth, 
or  iron  filings  toward  a  magnet.  Other  writers,  like  Adam 
Smith,  assign  this  mystical  power  not  to  the  valuable 
thing  itself,  but  to  the  possessor,  and  make  of  him  a  sort  of 
hypnotist  or  mesmerist  of  the  physical  phenomena  about 
him,  so  that  he  can  control  them  at  will. 

Now  the  simple  fact  is,  as  we  have  seen,  that  a  thing 
may  be  useful  for  the  direct  satisfaction  of  a  desire,  or  it 
may  be  useful  for  the  indirect  satisfaction  of  that  desire 
through  an  exchange  in  the  market.  It  may  have  fitness — 
not  power — as  a  trade-form  as  well  as  fitness  as  a  satis- 
form ;  or,  again,  its  distinctive  fitness  may  be  that  of  an  aid- 
form.  In  any  case  its  present  distinctive  fitness  to  satisfy 
desire  determines  the  use  to  which  it  is  put,  and  fitness  to 
satisfy  desire  is  not  power,  but  utility. 

We  enjoy  both  spontaneities  and  labor-forms;  but  we 
value  only  the  latter;  and  this,  not  because  disutility  cre- 
ates or  involves  any  occult  power,  but  because  it  results 


MEASURABLE  UTILITY   AND  DISUTILITY         111 

in  giving  to  utility  a  commercial  aspect.  Men  do  not  com- 
pete for  spontaneities  however  useful,  but  only  for  those 
useful  things  which  involve  disutility;  and  the  competition 
thus  engendered  by  disutility  gives  to  utility  a  competitive 
and  measurable  form  which  we  call  value.  The  disutility 
likewise  takes  on  a  competitive  and  measurable  form  which 
we  call  cost.  Half  of  the  difficulties  of  the  "dismal  sci- 
ence'' are  solved  when  we  get  thoroughly  instilled  into  the 
mind  two  ideas;  first,  that  utility  is  fitness  to  satisfy  de- 
sire; and,  second,  that  value  is  nothing  in  the  world  but  a 
form  of  utility,  viz.,  measurable  utility  at  the  point  of  ex- 
change. 

Although  the  doctrine  of  Adam  Smith  that  value  is 
"purchasing  power"  or  "power  in  exchange"  has  been 
adopted  by  John  Stuart  Mill,  Francis  A.  Walker,  Francis 
Wayland  and  many  other  prominent  writers,  it  has  not 
gone  unchallenged  to  the  present  time.  Indeed,  Mr.  Mill 
at  times  apparently  abandons  the  theory  that  value  is 
power,  and  speaks  of  the  value  of  anything  as  "the  quan- 
tity of  some  other  thing,  or  of  things  in  general,  which  it 
exchanges  for."  This  reduces  value  to  a  mere  equation, 
and  is  a  naive  suggestion  that  in  Economics,  as  in  Math- 
ematics, things  which  are  equal  to  the  same  thing  are 
equal  to  each  other.  This  form  of  descriptive  definition 
has  been  followed  by  a  number  of  writers  who  apparently 
have  not  pursued  the  matter  far  enough  to  see  that  it 
amounts  to  defining  (if  not  reasoning)  in  a  circle.  For  in- 
stance, if  we  define  the  value  of  a  hat  as  the  amount  of 
shoes  that  it  will  exchange  for,  and  assume  that  it  will 
exchange  for  one  pair  of  shoes,  then  the  value  of  a  pair  of 


ll.,J  BISOCIALISM— ECONOMICS 

shoes  is  certainly  a  hat.  But  what  from  this  do  we  know- 
about  value  itself? 

It  certainly  is  not  asking  too  much  of  one  who  presumes 
to  teach  Economic  Science  to  distinguish  between  value 
and  the  measure  of  value  when  comparisons  are  expressed 
in  terms  of  barter,  and  between  value  and  price  when  ex- 
pressed in  terms  of  money.  When  we  say  that  the  value 
of  a  hat  is  three  dollars  we  do  not  mean  that  value  is 
money,  but  that  the  particular  value  in  question  is  meas- 
ured in  terms  of  money.  \ATiat  should  we  think  of  a  writer 
on  Natural  Philosophy  who  defined  weight  as  the  quantity 
of  something  which  would  tip  the  other  end  of  a  scale 
beam?  or  the  weight  of  atmospheric  air  as  the  height  of 
the  mercury  in  a  barometric  column? 

Jevons,  an  English  writer,  saw  the  inconsistency  of  de- 
fining value  as  a  power,  and  preferred  to  discard  the  word 
value  entirely  and  to  use  instead  the  expression  "ratio  of 
exchange."  Under  his  theory  value  is  a  mere  relation 
which  one  thing  holds  to  another  or  to  all  things  in 
general.  Francis  A.  "Walker  held  that  value  is  merely  a 
relation  and,  therefore,  not  measurable,  but  capable  of 
expression  only  as  a  term  of  a  ratio.  A.  L.  Perry  has 
amplified  this  idea  by  claiming  that  men  really  exchange 
services  when  they  exchange  commodities  (which  is  true), 
and  by  defining  value  as  "the  relation  of  mutual  purchase 
established  between  two  services  by  their  exchange," 
which  is  incomprehensible.  Why  not  define  value  as 
something  which  tends  to  superinduce  mental  strabismus, 
and  have  done  with  it?  The  principles  of  the  science  of 
Economics  must  be  reduced  to  intelligible  ideas,  and  its 


MEASURABLE  UTILITY   AND  DISUTILITY         113 

definitions  must  be  clothed  in  comprehensible  language, 
if  this  science  is  not  wholly  to  lose  its  prestige.  As  the 
subject  is  often  treated  it  is  no  wonder  that  ordinary 
mortals  look  upon  Political  Economy  as  good  enough 
(perhaps)  in  theory,  but  useless  in  practice.  A  certain 
amount  of  congruity  must  be  maintained,  if  it  is  expected 
that  people  are  to  treat  the  matter  seriously.  When  a 
present  day  college  professor  and  economist  gravely  tells 
us  in  italics  that  "value  is  the  capacity  to  excite  desire,"* 
men  may  be  excused  for  concluding,  by  parity  of  reason- 
ing, that  hunger  is  capacity  io  excite  appetite;  lightning, 
capacity  to  excite  fear ;  and  Political  Economy,  capacity  to 
excite  credulity. 

Utility  is  fitness  to  satisfy  desire,  and  value  is  simply 
measurable  utility  at  the  point  of  exchange. 


•Richard  T.  Ely:     Outlines  of  Economics,  page  125. 


CHAPTER  X. 

OF  THE  POSITIVE  THEORY  OF  VALUE. 

A  high  margin  of  production  both  enables  and  compels 
society  to  bid  high  for  the  services  of  its  members. 

Simon  N.  Patton. 

Measurable  utilities  and  disutilities  are  reduced  to  a 
commercial  form  by  the  competition  of  the  market.  They 
start  from  a  common  point — the  point  of  disutility.  They 
are  measured  by  a  common  marginal  unit — one  cent  (or 
one  dollar).  Their  measurements  are  expressed  in  the 
same  terms — those  of  current  money.  The  upper  limit 
of  the  commercial  utility  and  of  the  commercial  disutility 
of  a  given  labor-form  is  fixed  by  the  same  point — the 
point  of  exchange.  Therefore,  the  commercial  utility  to 
the  seller — the  value — and  the  commercial  disutility  to 
the  buyer — ^the  cost — are  both  expressed  in  market  price. 
Value  and  cost  are  reducible  to  a  common  measure,  and 
for  this  reason  are  often  treated  as  if  they  were  one  and 
the  same  thing.  They  are  not  thereby  made  identical, 
however,  any  more  than  two  fractions  are  made  identical 
when  reduced  to  a  common  denominator. 

Let  us  carefully  examine  the  nature  of  commercial 
utility  and  disutility.  When  a  thing  capable  of  satisfying 
desire  can  be  acquired  without  labor,  or  with  so  little  labor 
that  its  disutility  is  not  worthy  of  consideration,  it  may  be 
of  the  highest  utility;  but  its  entire  utility  is  immeasur- 
able;  it  has  no  economic  utility  whatever.     Thus,  a  cup 

114 


OF  THE  POSITIVE  THEORY  OP  VALUE  115 

of  mineral  water  dipped  from  a  public  spring  is  handed 
by  one  person  to  another  as  a  mere  courtesy.  But  if  the 
mineral  water  is  transported  to  a  distant  city  for  medicinal 
use,  it  ceases  to  be  a  spontaneity  and  at  once  acquires  an 
economic  utility.  Let  us  assume  that  the  disutility  of 
putting  a  pint  of  mineral  water  upon  the  market  in  the 
city  is  equal  to  the  common  marginal  unit  of  disutility — 
one  cent.  In  normal  conditions  its  commercial  utility  is 
greater  than  its  industrial  disutility,  or  it  will  not  be  put, 
or  at  least  not  kept,  upon  the  market.  Let  us,  therefore, 
assume  that  it  sells  for  two  cents  a  pint.  Its  disutility 
to  the  buyer,  or  cost,  is  then  the  equivalent,  in  terms  of 
the  common  unit,  of  its  commercial  utility,  or  value. 

Thus,  while  the  particular  producer  puts  a  pint  of 
mineral  water  on  the  market  at  an  industrial  disutility 
of  one  cent,  the  buyer  prefers  to  acquire  it  at  a  com- 
mercial disutility  of  two  cents  rather  than  stop  his  regular 
calling,  or  otherwise  be  put  to  the  inconvenience  of  pro- 
ducing it  himself.  Doubtless  he  is  so  circumstanced  that 
he  can  not  produce  it  for  himself  except  at  a  far  greater 
disutility  than  two  cents.  The  market  price,  therefore,  to 
him,  not  only  represents  commercial  disutility,  but  it 
measures  an  avoidance  of  industrial  disutility — a  saving 
of  labor-power.  The  utility  in  his  hands  is  thus  increased 
by  the  amount  of  the  industrial  disutility  saved. 

In  this  way  it  may  be  seen  that  while  utility  is  one 
thing  and  disutility  another  and  directly  opposite  thing, 
yet  the  measure  of  the  one  is  reducible  to  the  terms  of 
the  measure  of  the  other,  because  the  diminution  of  the 
one  is  equivalent  to  a  corresponding  increase  of  the  other. 


116  BISOCIALISM— ECONOMICS 

It  is  natural  and  logical,  therefore,  that  value  and  cost 
should  both  be  expressed  by  price  at  the  point  of  exchange. 
It  is  not  logical,  however,  to  ignore  the  fundamental 
difference  between  utility  and  disutility,  or  to  treat  dis- 
utility as  the  principal  element  of  value,  as  is  done  in  the 
"labor"  and  "labor  cost"  theories  of  value.  As  well  might 
the  natural  philosopher  say  that  cold  is  the  controlling 
element  of  heat,  or  darkness  the  principal  constituent  of 
light. 

It  is  true  that  the  commercial  utility  of  a  trade-form 
is  largely  its  utility  in  procuring  for  the  seller  the  labor- 
power  or  labor-forms  of  others.  But  these  facts  do  not 
justify  a  jumbling  together  of  the  ideas  of  value  and  cost. 
Men  do  not  buy  labor-forms  for  the  sake  of  acquiring  the 
disutility  attending  their  production,  but  in  order  to  ac- 
quire their  present  utility.  And  while  a  man  may  buy 
and  sell  by  one  and  the  same  act,  he  is  distinctively  either 
a  buyer  or  seller  in  the  common  acceptation  of  those  terms. 
In  actual  business  life  no  confusion  ever  arises  upon  this 
point.  The  problem  of  every  man  as  seller  differs  from 
his  problem  as  buyer.  The  immediate  problem  of  the 
seller  as  a  producer  is  to  acquire  net  value;  while  the 
immediate  problem  of  the  buyer  as  a  final  consumer  is  to 
acquire  net  salvage.  The  one  is  interested  in  the  pro- 
duction and  sale  of  capital-forms;  the  other,  in  the 
acquirement  and  consumption  of  satisforms.  If  the  buyer 
buys  to  sell  again,  he  thereby  converts  his  net  salvage 
into  net  value  and  becomes  distinctively  a  seller.  His 
cost  as  a  buyer  becomes  disvalue  to  him  as  a  seller,  and 
he  reckons  his  whole  gain  upon  the  last  transaction.    This 


OP  THE  POSITIVE  THEORY  OF  VALUE  IV 

he  can  readily  do  since  net  salvage  and  net  value  are  both 
expressed  and  measured  in  terms  of  money. 

The  seller  seeks  for  utility  in  the  form  of  net  value; 
the  buyer  seeks  utility  also,  but  in  the  form  of  net  sal- 
vage. The  seller,  as  producer,  acquires  utility  directly  by 
creating  it;  the  buyer,  as  consumer,  obtains  it  indirectly 
by  saving — avoiding — disutility.  Tliis  explains  why  it  is 
that  both  buyer  and  seller  may  be  benefited,  and  equally 
benefited,  by  an  exchange.  If  the  only  exchange  possible 
were  the  exchange  of  one  positive  utility  for  another 
equally  desirable,  and  there  were  no  place  in  the  process 
of  the  market  for  the  negative  feature  by  which  disutility 
saved  is  the  equivalent  of  utility  acquired,  then  what  one 
person  gained  in  exchange  the  other  would  necessarily 
lose.  But  since  the  seller  can  create  utility  for  the  use 
of  another  to  greater  advantage  than  for  his  own  direct 
use,  and  the  buyer  can  acquire  such  utility  for  his  use  at 
less  disutility  by  exchange  than  by  direct  production,  the 
competitive  system,  in  itself,  is  a  labor-saving  device  of 
great  economic  utility.  This  great  principle  of  the  market 
is  overlooked  by  the  omnisocialist.  He  maintains  that  in 
every  exchange  the  gain  of  the  seller  is  necessarily  at  the 
expense  of  the  purchaser.  Said  Karl  Marx:  "Circulation 
[exchange  in  the  market]  sweats  money  from  every 
pore."* 

Let  us  bring  our  definitions  of  value,  cost,  and  price  to 
the  test  not  only  of  the  usual,  but  of  all  the  phenomena 
of  the  market.     It  has  been  said  that  water  has  great 


*Das  Kapital:    Moore  and  Aveling's  Translation,  page  54. 


118  BISOCIALISM— ECONOMICS 

utility,  but  scarcely  any  value,  while  a  diamond  has  great 
value  and  scarcely  any  utility.  The  words  italicized  are 
directly  opposite  the  truth  when  value  and  utility  are 
properly  defined  and  distinguished.  Utility  is  simply  fit- 
ness to  satisfy  desire,  and  desire  exists  not  only  for  neces- 
sities, but  also  for  luxuries.  Value  is  but  a  form  of  meas- 
urable utility,  and  measurable  utility  is  but  a  part  of 
entire  utility.  Hence,  to  say  of  a  diamond  tha4;  its  value 
is  greater  than  its  utility  is  to  say  that  a  part  of  utility 
is  greater  than  the  whole,  which  is  impossible  in  Economics 
as  truly  as  in  Mathematics. 

We  need  not  wear  diamonds  for  personal  comfort,  and, 
individually,  we  may  not  care  to  do  so  for  personal  adorn- 
ment. Yet  we  know,  as  a  matter  of  common  knowledge, 
that  in  the  market  diamonds  have  a  very  great  utility  to 
the  seller  at  the  point  of  exchange.  They  bear  a  high 
I  rice  utterly  regardless  of  what  we  may  think  of  the  rela- 
tive merit  of  the  desire  which  prompts  their  purchase. 
It  is  not  the  merit  of  men's  desires,  but  their  relative 
intensity  with  which  Economics  has  to  deal,  and  the  desire 
for  diamonds  is  exceedingly  intense.  The  industrial  dis- 
utility of  diamonds  is  very  great,  but  just  so  long  as  some 
men  are  willing  to  acquire  diamonds  at  a  great  commer- 
cial disutility  so  long  will  other  men  undergo  the  indus- 
trial disutilities  of  their  production,  and  so  long  will 
diamonds  have  great  commercial  utility  for  the  producer. 
The  price  of  diamonds  is  fixed  by  the  marginal  pair  in 
the  diamond  market,  but  the  marginal  buyer  of  diamonds 
is  far  above  the  marginal  buyer  of  staple  articles  in  ability 
to  purchase. 


OF  THE  POSITIVE  THEORY  OF  VALUE  119 

In  the  current  theories  of  value  exception  must  be  made 
in  the  case  of  certain  labor-forms  which  are  rare  and  in- 
capable of  reproduction,  as  pictures  by  famous  painters, 
heirlooms  and  the  like.  It  is  commonly  said  that  the  ordi- 
nary laws  of  value  do  not  apply  to  these,  and  various 
explanations  are  given  for  their  great  value.  In  the  first 
place,  they  are  frequently  spoken  of  as  having  great  value 
when  they  are  not  in  the  market  at  all,  and  hence  have  no 
commercial  utility  whatever.  The  word  value  when  ap- 
plied to  them  is  then  a  misnomer  from  an  economic  point 
of  view.  But  when  such  things  are  put  upon  the  market, 
they  are  subject  to  all  the  laws  of  value,  cost,  and  price, 
and  do  not  differ  in  any  wise  from  other  articles  which 
sell  in  a  one-sided  instead  of  a  general  market. 

In  this  connection  we  may  also  consider  the  case  of 
articles  which  sell  at  church  fairs,  or  in  other  unusual 
markets  for  much  more  than  their  usual  market  values. 
The  peculiar  circumstances  give  to  such  objects  increased 
commercial  utility,  and  they  are  acquired  by  the  pur- 
chaser at  increased  commercial  disutility  so  far  as  the 
transactions  have  any  economic  significance.  If,  how- 
ever, the  additional  price  paid  be  considered  as  a  dona- 
tion rather  than  as  purchase  money,  such  a  case  is  removed 
from  the  province  of  Economics. 

The  foregoing  definitions  and  explanations  of  value  and 
cost  apply  not  only  to  all  labor-forms,  but  to  labor  itself. 
We  have  seen  that  the  expenditure  of  effort  in  the  satisfac- 
tion of  desire  is  not  necessarily  and  always  irksome.  Up 
to  a  certain  point  exertion  may  give  pleasure,  while  be- 
yond such  point  it  may  become  more  and  more  irksome. 


120  BISOCIALISM— ECONOMICS 

Economics  takes  note  of  productive  efforts  only  when 
they  involve  irksomeness.  Those  expenditures  of  effort 
which  give  pleasure,  or  to  which  men  are  practically  in- 
different, correspond  to  the  spontaneities  of  nature  among 
material  substances.  Hence,  in  the  matter  of  human 
exertion  the  point  where  irksomeness  begins  is  the  point 
of  disutility.  The  point  at  which  irksomeness  ceases  to 
cancel  the  benefit  derived  from  exertion  is  the  point  of 
positive  utility,  and  the  benefit  lying  beyond  this  point 
is  the  positive  utility  of  the  labor  performed.  Inasmuch 
as  the  concrete  result  of  such  labor — the  resulting  labor- 
form — avails  the  laborer  in  the  market,  the  labor  itself 
possesses  a  commercial  utility  and  commands  a  price. 
The  point  of  exchange  becomes  the  upper  limit  of  com- 
mercial utility  to  the  seller,  and  of  commercial  disutility 
to  the  buyer  of  labor,  and  thus  all  the  requisites  of  value 
and  cost  appear  in  relation  to  the  exertion  of  labor-power. 
All  the  laws  of  the  market  prevail  with  reference  to  labor 
just  the  same  as  with  reference  to  labor-forms.  The  exer- 
tion of  labor-power  directly  in  the  form  of  personal  ser- 
vices corresponds  in  function  to  the  satisforms  among 
labor-forms;  while  labor-power  expended  in  the  produc- 
tion of  labor-forms  for  future  use  corresponds  in  function 
to  capital-forms. 

The  labor-cost  theory  of  value  looks  upon  irksomeness 
as  the  distinguishing  characteristic  of  labor-power  and 
treats  labor  wholly  as  a  matter  of  cost,  or  disutility.  But 
labor-power  has  utility  as  well  as  disutility,  and  it  is  its 
positive  utility  which  gives  to  it  its  real  economic  sig- 
nificance.   Wages  are  paid  for  the  utility  of  labor-power; 


OF  THE  POSITIVE  THEORY  OF  VALUE  121 

its  disutility  is  a  mere  circumstance  which  prevents  its 
utility  from  being  spontaneous.  It  is  only  negatively 
that  disutility  enters  into  the  question  of  value.  The 
positive  theory  of  value  is  the  theory  based  upon  utility. 

There  is  still  another  phase  of  the  phenomena  of  value 
and  cost  to  which  our  definitions  and  discussions  must 
apply,  if  correct  and  complete.  They  must  apply  to  the 
phenomena  of  the  market  with  reference  to  land-forms. 
In  order  that  we  may  make  a  necessary  distinction  between 
utilities  which  are  the  distinctive  results  of  labor-power 
and  those  which  are  not,  we  shall  repeat  two  of  our 
definitions  and  then  add  a  new  one,  as  follows : 

Labor-Power  is  the  physical  or  mental  power  of  man 
irksomely  exerted  for  the  satisfaction  of  desire. 

A  Labor-Form  is  any  material  substance,  great  or  small, 
so  circumstanced  that  its  present  distinctive  utility  is  the 
result  of  labor-power. 

A  Land-Form  is  a  definite  portion  of  the  earth's  surface, 
great  or  small,  together  with  all  the  utilities  which  may 
be  enjoyed  thereon  or  in  connection  therewith,  except 
those  utilities  which  are  distinctively  the  result  of  labor- 
power. 

It  may  appear  at  first  blush  that  it  is  difficult,  if  not 
impossible,  in  many  cases  to  distinguish  between  labor- 
forms  and  land-forms.  This  is  especially  true  in  those 
cases  in  which  the  change  made  by  labor-power  is  com- 
paratively slight  and  does  not  separate  any  material  sub- 
stance from  the  soil.  But  all  difficulty  practically  vanishes 
as  soon  as  it  is  remembered  that  Economics  treats  not  of 
forms  merely,  but  of  utilities  and  disutilities:   and  not  of 


123  BISOCIALISM— ECONOMICS 

utilities  in  general,  but  of  those  distinctive  utilities  which 
may  be  measured.  Thus,  a  field  in  its  natural  state  may 
be  of  the  value  of  fifty  dollars  per  acre,  wliile  its  added 
utility,  when  plowed,  is  one  dollar  per  acre.  It  is  not 
necessary  in  such  case  to  say  that  the  field,  when  plowed, 
is  merely  a  land-form,  or  entirely  a  labor-form.  The 
added  utility  given  by  labor  is  capable  of  separation  and 
measurement.  So  long  as  the  two  utilities  are  so  distinct 
that  a  price  may  be  set  upon  each,  there  is  no  difficulty  in 
separating  them,  either  in  thought  or  in  actual  business 
transactions.  It  is  not  unusual  in  the  sale  of  farms,  after 
plowing  has  been  done,  for  the  land  to  be  priced  at  so 
much  per  acre,  with  an  additional  charge  per  acre  for  the 
plowed  fields.  To  the  extent  of  their  added  value  these 
fields  are  practically  labor-forms.  Whenever  natural  and 
artificial  utilities  are  so  blended  that  all  market  distinc- 
tion is  lost,  there  is  no  necessity  for  their  separation  in 
thought  or  otherwise,  and  all  economic  distinction  as  to 
form  ceases. 

A  similar  difficulty  arises  in  the  minds  of  some  with 
respect  to  distinctions  between  land-forms  and  improve- 
ments thereon.  Yet  it  is  well  known  that  bare  land-forms 
have  a  value  wholly  separate  and  distinct  from  the  values 
of  the  improvements;  when  all  improvements  upon  a  land- 
form  have  been  swept  away  by  fire  this  is  easily  seen. 
Buildings  are  often  erected  upon  leased  land,  and  there- 
after the  buildings  and  the  bare  land-forms  are  valued 
and  sold  separately.  Not  infrequently  city  lots  are  sold 
with  leave  to  the  seller  to  retain  and  remove  all  improve- 
ments.    And  even  in  those  eases  in  which  the  improve- 


OF  THE  POSITIVE  THEORY  OF  VALUE  1^3 

raents  are  practically  inseparable  from  the  land-form  itself, 
as  in  the  case  of  drain  tile,  the  value  of  the  utility  added 
by  labor  may  be  computed.  The  difference  between  the 
values  of  tiled  and  untiled  land  in  the  same  neighborhood 
and  of  like  natural  fertility  is  well  known.  In  such  cases 
as  these,  as  in  the  case  of  the  plowed  field,  whenever  there 
is  such  a  merger  of  labor- form  and  land-form  that  the 
distinction  can  not  be  noted  in  the  market  and  expressed 
in  price,  the  economic  distinction  as  to  form  ceases,  the 
land-form  absorbing  all  utility. 

In  all  cases  in  which  the  substance  in  question  is  sepa- 
rate from  the  soil,  the  test  as  to  whether  it  is  a  land-form 
or  a  labor-form  is  simply  this:  What  is  its  present  dis- 
tinctive utility?  Is,  or  is  not  this  distinctive  utility  the 
result  of  labor-power?  If  its  distinctive  utility  results 
from  a  change  of  form  or  place,  or  both,  brought  about  by 
labor-power,  then  it  is  a  labor-form;  otherwise  it  is  a  land- 
form. 

Some  land-forms  may  be  acquired  without  disutility, 
either  industrial  or  commercial.  In  such  case  they  have  no 
commercial  utility  so  long  as  land-forms  equally  desirable 
may  be  acquired  by  others  in  like  manner.  But  as  soon  as 
the  acquisition  and  possession  of  a  land-form  carries  with 
it  a  utility  for  which  men  will  compete,  such  land-form 
acquires  both  commercial  utility  and  commercial  disutility. 
The  point  at  which  competition  for  land-forms  begins  is 
the  point  of  disutility,  while  the  point  at  which  the  effort 
to  acquire  them  ceases  to  cancel  or  neutralize  the  utility 
of  their  possession  and  enjoyment  is  the  point  of  positive 
utilitv.     Since  laud-forms  furnish  the  materials  out  of 


124  BISOCIALISM— ECONOMICS 

which  all  labor-forms  are  made  and  from  which  all  ma- 
terial satisfactions  arise,  they  will,  when  reduced  to 
exclusive  private  possession,  bear  prices  in  the  market 
according  to  their  relative  utilities.  Their  price  will  fix 
the  upper  limit  of  both  their  commercial  utility  to  the 
seller  and  their  commercial  disutility  to  the  buyer.  Land- 
forms,  therefore,  acquire  all  the  elements  of  value  and 
cost,  and  are  amenable  to  all  the  laws  of  the  market. 
The  distinctive  conditions,  however,  which  tend  to  govern 
the  prices  of  land-forms  as  to  whether  they  shall  be  high 
or  low  are  not  the  same  as  those  which  tend  to  govern 
the  prices  of  labor-forms.  In  fact,  the  tendencies  of  their 
respective  prices  are  in  opposite  directions.  The  prices  of 
land-forms  tend  to  increase,  while  the  prices  of  labor- 
forms  tend  to  diminish  as  population  in  any  given  terri- 
tory increases.  The  reason  of  this  is  that  an  increase  of 
population  within  a  fixed  territory  tends  to  develop  a 
one-sided  market  as  to  land-forms,  and  a  general  market 
as  to  labor-forms.  In  one  case  the  tendency  is  for  the 
price  to  be  fixed  by  the  necessities,  and  in  the  other  by 
the  indifference  of  the  marginal  buyer. 

For  the  sake  of  brevity  and  clearness  we  have  hitherto 
assumed  the  presence  of  normal  economic  conditions.  The 
definitions  which  we  have  developed,  however,  apply  to 
abnormal  conditions,  also,  subject  to  necessary  qualifica- 
tions. For  instance,  a  labor-form  may  sell  upon  the  mar- 
ket at  less  than  the  cost  of  production,  or,  as  we  would 
express  it,  its  value  may  be  less  than  its  disvalue.  In  such 
case,  the  point  of  exchange  will  lie  below  the  point  of 
positive  utility,  and  the  disutility  will  more  than  cancel 


OF  THE  POSITIVE  THEORY  OF  VALUE  125 

the  utility.    And  since  the  disvalue  will  exceed  the  value, 
there  will  be  a  loss  instead  of  net  value  to  the  seller. 

Such  abnormal  conditions  can  not  long  persist.  In  the 
ordinary  course  of  business  the  value  must  be  sufficiently 
great  to  create  a  net  value,  or  the  producer  will  cease  his 
efforts.  It  is  well  to  note  in  this  connection,  moreover, 
that  neither  the  cost  of  present  production  nor  the  cost 
of  present  reproduction  of  the  particular  labor-form  deter- 
mines its  price.  The  price,  as  we  have  seen,  is  determined 
partly  by  the  disutility  of  like  labor-forms  to  the  marginal 
producer,  and  partly  by  their  utility  to  the  marginal  buyer, 
the  tendency,  in  a  general  market,  being  toward  the  latter. 
For  just  as  the  price  in  such  a  market  is  fixed  independ- 
ently of  any  particular  buyer  or  seller  above  the  margin, 
so  it  is  fixed  independently  of  the  industrial  disutility, 
past  or  present,  of  any  particular  labor-form  above  that 
produced  and  purchased  by  the  marginal  pair.  The  in- 
dustrial disutility  of  particular  labor-forms  even  at  the 
margin  must  be  less  than  the  market  price,  or  their  pro- 
duction will  cease;  but  once  they  are  produced  and  put 
upon  the  market  they  will  sell,  if  at  all,  at  the  price 
fixed  by  their  utilities  and  disutilities  to  the  marginal  pair. 
As  we  have  already  seen,  a  labor-form  is  not  produced  in 
the  economic  sense  until  it  is  put  upon  the  market.  An 
ax  is  not  produced  when  it  is  completed  at  the  factory. 
It  must,  under  the  present  system,  be  boxed  or  crated, 
and  then  carted  and  shipped,  first  to  the  wholesaler,  and 
then  to  the  jobber,  and  finally  to  the  retail  dealer,  to  be 
exposed  by  him  for  sale  to  the  final  consumer.  All  the 
men  so  handling  the  ax  prior  to  its  final  sale  are  pro- 


126  BISOCIALISM— ECONOMICS 

ducers.  Exchange  is  just  as  truly  a  part  of  the  economic 
process  of  production  as  industry.  A  seller,  economically 
speaking,  is  a  producer. 

If  it  be  true,  as  the  theory  which  we  have  developed 
maintains,  that  value  is  essentially  a  limited  or  measurable 
portion  of  utility,  that  its  lower  limit  is  fixed  by  the 
point  of  disutility,  and  its  upper  limit  by  the  point  of 
exchange,  which,  in  turn,  is  determined  by  the  utilities 
and  disutilities  of  the  marginal  pair,  then  it  behooves 
Economic  Science  to  inquire  into  all  the  conditions  which 
may  surround  or  affect  the  men  who  produce  and  purchase 
at  the  margin.  For  if  they  are  the  determiners  of  value, 
cost  and  price,  then  all  economic  research  must  extend 
to  them  and  not  exhaust  itself  in  a  study  of  those  condi- 
tions which  chiefly  surround  those  who  are  farthest  from 
the  margin.  And  if  it  be  true  that  the  practical  problems 
of  industry  arise  from  man's  attempt  to  secure  the  greatest 
net  value  with  the  least  exertion,  and  that  net  value  lies 
between  two  movable  points — the  point  of  positive  utility 
and  the  point  of  exchange — then  it  behooves  the  econ- 
omist of  a  practical  era  to  examine  critically  all  those 
means  by  which  each  of  these  points  may  be  raised  or 
lowered.  And  since  under  the  theory  herein  discussed  the 
ultimate  end  and  aim  of  the  problems  of  Economics  is  the 
acquisition  and  enjoyment  of  net  value  and  net  salvage, 
by  seller  and  buyer,  respectively,  the  questions  of  value, 
cost  and  price,  and  the  means  by  which  they  may  be 
manipulated,  become  of  supreme  economic  importance  both 
to  the  individual  and  to  society. 


CHAPTER  XI. 


OF  THE  ORIGIN  OF  VALUES. 


Utility  is  the  purpose  of  economic  life.  Whatever  increases 
utility  has  value.  F.  von  Wieser. 

A  few  of  the  simpler  labor-forms  may  be  produced  by 
the  application  of  labor-power  directly  upon  land-forms. 
But  in  modern  industry  practically  all  production  is 
effected  by  the  interposition  and  assistance  of  capital- 
forms.  We  have,  therefore,  for  use  in  normal  production 
three  forms  of  utility,  and  only  three — the  utility  of  labor- 
power,  the  utility  of  capital-forms,  and  the  utility  of  land- 
forms.  On  the  other  hand,  normal  production  has  to 
contend  with  three,  and  only  three  disutilities — the  dis- 
utility of  matter,  the  disutility  of  time,  and  the  disutility 
of  space.  It  must  be  understood,  however,  that  the  real 
physical  element  involved  in  the  first  mentioned  disutility 
is  not  matter  but  force.  Matter  is  but  a  manifestation  of 
forces  in  equilibrium;  it  has  no  body  or  substance  of  its 
own.  But  as  all  forces  manifest  themselves  to  us  through 
what  we  call  matter,  we  shall,  for  convenience,  use  the 
latter  term,  meaning  thereby  the  resultant  of  forces  in 
equilibrium.  With  this  understanding  we  may  divide  our 
physical  environment  into  the  elements  of  matter,  time 
and  space.  Without  each  of  these  neither  we  nor  any- 
thing within  our  comprehension  can  exist.  They  are  all 
as  necessary  to  us  as  sentient  beings  a<  life  itself;  yet 
each  has  for  us  a  distinctive  disutility. 

127 


128  BISOCIALISM— ECONOMICS 

The  disutility  of  matter  manifests  itself  in  resistance  to 
labor-power.  Although  all  production  consists  simply  in 
changing  the  form  or  position  of  material  objects,  such 
changes  are  attended  by  irksomeness,  just  as  all  movements 
of  machinery,  however  perfect,  are  attended  by  friction. 
Were  it  not  for  the  disutilities  of  matter  and  space,  all 
satisforms  would  be  spontaneities,  and  the  exertion  of 
labor-power  unnecessary.  The  only  economic  disutility 
would  be  that  of  time — the  disutility  of  waiting. 

The  distinctive  function  of  labor-power  is  to  overcome 
the  disutility  of  matter.  Its  utility  depends  upon  its  fit- 
ness for  this  purpose.  The  value  of  a  labor-form  which 
is  distinctively  the  resultant  of  the  utility  of  labor-power 
and  the  disutility  of  matter  we  shall  call  labor  value.  This 
term  we  shall  define  later. 

To  a  very  great  extent,  but  not  entirely,  the  utility  of 
capital-forms  is  identical  with  that  of  labor-power.  Capi- 
tal-forms are  themselves  the  result  of  labor-power  and  can 
only  be  used  in  connection  Avith  its  further  exertion.  Of 
themselves  capital-forms  can  do  nothing.  As  labor-forms 
they  sell  in  the  market,  subject  to  the  same  laws  of  value 
and  cost  as  satisforms.  Their  prices  are  fixed  by  the  mar- 
ginal pair.  But  aside  from  being  sold  outright,  capital- 
forms  may  be  sold  for  a  limited  time.  One  man  may  be 
possessed  of  a  labor-form  for  which  he  has  no  immediate 
need.  Another  may  be  in  present  need  of  such  a  labor- 
form  without  having  it  in  immediate  possession.  In  such 
case  the  latter  person,  in  order  to  secure  its  immediate 
possession  and  use,  may  offer  to  take  it,  and,  at  the  expira- 
tion of  a  given  time,  return  it,  together  with  a  part  of 


OF  THE  ORIGIN  OF  VAL.UES  129 

the  product  acquired  by  its  use  as  a  capital-form.  If  such 
an  offer  is  made,  it  is  because  the  present  advantage  of 
the  possession  and  use  of  the  capital-forms  is  at  least 
equivalent,  in  the  mind  of  the  borrower,  to  the  disutility 
of  its  repayment,  plus  the  payment  of  the  part  of  the 
product  as  interest.  And  if,  as  is  usually  the  case,  the 
amount  of  product  to  be  repaid  is  fixed  by  competition 
in  the  market,  and  money-forms  are  borrowed  instead  of 
particular  capital-forms,  the  sum  borrowed  in  the  present 
and  the  sum  to  be  repaid  in  the  future  are  economically 
equivalent.  For  instance,  if  John  on  the  first  day  of  the 
3'ear  borrows  from  James  in  the  open  market  $100  upon 
agreement  to  return  $105  at  the  end  of  the  year,  then,  on 
the  day  of  the  borrowing  and  in  that  market  $100  for 
present  possession  and  use,  and  $105  for  possession  and 
use  one  year  thence  are  economic  equivalents. 

If  the  offer  to  borrow  with  repayment  with  interest  is 
accepted,  the  capital-form  or  equivalent  money-form 
loaned  acquires  a  new  and  distinctive  utility.  It  is  no 
longer  merely  auxiliary  to  labor-power  in  overcoming  the 
disutility  of  matter,  but  it  is  a  direct  instrumentality  in 
overcoming  the  irksomeness  of  waiting — an  aid  in  miti- 
gating the  disutility  of  time. 

The  labor-form  loaned  has  to  men  in  general  less  future 
than  present  utility  because  of  the  disutility  of  deferred 
satisfaction.  We  have  already  seen  that  men  usually  place 
a  lower  estimate  upon  a  given  labor-form  for  future  than 
for  immediate  enjoyment.  Under  a  specialized  system  of 
industry,  however,  some  men  acquire  quantities  of  labor- 
forms  (or  money-forms  derived  from  the  sale  of  labor- 


130  BIS0CIALI9M— ECONOMICS 

forms)  which  they  do  not  immediately  require  for  ordi- 
nary uses.  In  such  circumstances  they  are  willing  to 
surrender  present  possession  to  others  who  are  so  circum- 
stanced as  to  put  them  to  profitable  use.  On  the  other 
hand,  other  men  have  present  need  of  the  labor-forms,  or 
their  equivalent  in  money,  and  are  willing  to  undergo  a 
larger  future  disutility  rather  than  a  smaller  present  one. 
They  do  this  not  because  they  are  improvident  of  the 
future,  but  because  the  immediate  possession  and  use  of 
the  labor-forms  as  capital-forms  will  enable  them  not  only 
to  acquire  a  larger  product  in  the  same  time,  but  it  will 
also  give  them  their  product  in  less  time.  If  the  use  of 
labor-forms  merely  assists  labor-power  in  overcoming  the 
disutility  of  matter,  the  disutility  of  time  remaining  the 
same,  the  result  is  the  same  as  if  more  labor-power  were 
used,  and  no  additional  and  distinct  disutility  is  overcome. 
But  if  the  use  of  labor-forms  enables  the  possessors  to 
acquire  and  enjoy  the  finished  products  of  their  labor- 
power  sooner  than  they  otherwise  would,  it  thereby  over- 
comes or  lessens  the  disutility  of  time.  This  is  the  dis- 
tinctive utility  of  pure  capital  in  production  as  distin- 
guished from  the  distinctive  utility  of  auxiliary  capital. 

Capital  is  labor-forms  so  circumstanced  that  their  dis- 
tinctive utility  is  manifested  either  in  overcoming  the  dis- 
utility of  time,  or  in  assisting  labor-power  to  overcome 
the  disutility  of  matter. 

Pure  Capital  is  labor-forms  so  circumstanced  that  their 
distinctive  utility  is  manifested  in  overcoming  the  disutility 
of  time. 

Auxiliary  Capital  is  labor-forms  so  circumstanced  that 


OF  THE  ORIGIN  OF  VALUES  131 

their  distinctive  utility  is  manifested  in  assisting  labor- 
power  to  overcome  the  disutility  of  matter. 

The  labor-forms  involved  in  capital,  whether  pure  or 
auxiliary,  are  distinctively  possessed  of  intermediate  utility 
and  hence  are  capital-forms.  Land-forms  never  constitute 
capital,  either  auxiliary  or  pure. 

Both  pure  capital  and  auxiliary  capital  may  consist  of 
aid-forms,  ordinary  trade-forms,  or  money-forms.  If  these 
forms,  or  any  of  them,  are  used  to  assist  labor-power  in 
overcoming  the  resistance  of  matter,  they  are  auxiliary 
capital;  if  used  specifically  to  overcome  or  to  lessen  the 
disutility  of  time,  they  are  pure  capital. 

Auxiliary  capital,  when  put  upon  the  market,  is  sold 
outright  and  at  its  labor  value.  Its  distinctive  value  is 
expressed  in  price.  But  pure  capital  is  not  sold  outright, 
but  only  for  a  limited  time.  Its  distinctive  value  is  not 
expressed  in  price,  but  in  terms  of  interest,  and  is  not  a 
labor  value  but  a  capital  value. 

Labor  Value  is  that  value  which  is  distinctively  the 
resultant  of  the  utility  of  labor-power  (with  or  without 
the  use  of  auxiliary  capital)  and  the  disutility  of  matter. 

Capital  Value  is  that  value  which  is  distinctively  the 
resultant  of  the  utility  of  capital-forms  and  the  disutility 
of  time. 

In  order  that  we  may  distinguish  clearly  between  capital 
value  and  labor  value,  let  us  consider  a  simple  illustration. 
Two  men  working  side  by  side  produce  separate  labor- 
forms.  Their  customeri?  are  fishermen.  One  worker  pro- 
duces a  hammock  suitable  for  a  fisherman's  home;  the 
other,  with  like  material?  and  equal  disutility,  produces  a 


132  BISOCIAUSM— ECONOMICS 

fish  net,  or  seine.  Together  they  go  into  the  market  and 
offer  their  wares  for  sale.  In  their  hands  the  two  products 
are  capital-forms.  After  they  are  sold,  the  seine  remains 
a  capital-form  (changing  from  a  trade-form  to  an  aid- 
form)  and  the  hammock  becomes  a  satisform. 

Each  of  these  articles  can  be  made  by  any  person  of 
ordinary  skill,  and  the  materials  can  be  acquired  in  the 
open  market  or  made  at  first  hand  with  very  little  dis- 
utility. It  wall  take  the  ordinary  fisherman  as  long  to 
stop  his  work  and  make  the  one  as  the  other.  In  these 
circumstances  the  tendency  is  that  the  hammock  and 
seine  will  sell  in  the  open  market  at  the  same  price.  It 
is  true  that  the  hammock  as  a  satisform  does  not  assist 
its  purchaser  in  catching  fish,  while  the  seine  as  a  capital- 
form  may  double  or  quadruple  the  catch  of  its  possessor. 
Yet  the  satisform  and  the  auxiliary  capital-form  may  have 
the  same  value — they  may  be  economic  equivalents. 

That  this  should  be  true  may  at  first  seem  strange.  But 
if  we  have  thoroughly  mastered  the  laws  of  the  open  mar- 
ket, we  shall  readily  understand  why  it  is  so.  If  the  fisher- 
men were  to  pay  more  for  seines  than  for  hammocks,  the 
hammock  makers  would  all  turn  seine  makers,  inasmuch 
as  they  would  thereby  gain  more  compensation  for  the 
same  disutility.  This  would  cause  so  great  competition 
among  the  sellers  of  seines  that  the  marginal  seller  would 
bid  down  to  what  he  could  make  by  selling  hammocks, 
and  all  others  would  be  compelled  to  sell  at  his  price.  It 
must  be  remembered  that  value  does  not  express  utility  in 
general,  but  only  measurable  utility  at  the  point  of  ex- 
change, and  the  point  of  exchange  is  determined  by  the 


OF  THE  ORIGIN  OF  VALUES  133 

competition  of  the  marginal  pair.  In  so  far  as  value  is 
expressed  in  the  market  price  of  labor-forms  there  is  no 
distinction  between  the  values  of  capital-forms  and  satis- 
forms — all  are  labor  values.  They  are  values  which  dis- 
tinctively result  from  the  utility  of  labor-power  applied 
directly  or  indirectly,  and  the  disutility  of  matter. 

But  while  the  use  of  labor-forms  in  overcoming  the 
disutility  of  matter  simply  increases  the  efficiency  of  labor- 
power  in  that  respect,  and  so  merely  affects  labor  values, 
yet  labor-forms  may  be  so  circumstanced  as  to  overcome 
the  disutility  of  time.  Suppose  that  in  the  seine  and 
hammock  market  there  is  a  buyer  who  has  a  hammock 
but  is  without  a  seine,  the  present  possession  of  which 
would  be  of  great  advantage  over  its  future  possession. 
He  may  work  at  fishing  with  a  hook  and  line,  and  in  the 
course  of  a  year  may  acquire  the  price  of  a  seine,  thus 
suffering  all  the  irksomeness  of  deferred  satisfaction;  or, 
lie  may  buy  the  seine  at  an  enhanced  price  payable  at  the 
end  of  the  year.  By  obtaining  possession  of  the  seine  he 
can  enter  at  once  into  the  enjo}Tnent  of  the  maximum 
fruits  of  his  labor-power,  and  thus  obviate  to  a  large  extent 
the  disutility  of  time.  With  him  it  is  not  merely  a  matter 
of  having  more  fish,  but  of  having  them  to-day  rather 
than  next  year. 

In  such  circumstances  be  may  either  buy  a  seine  "on 
time"  at  a  higher  price,  or  he  may  borrow  the  present  cash 
})rice  and  repay  the  loan  in  one  year  with  interest.  In 
the  former  case  the  seine  sells  at  its  labor  value  plus  its 
capital  value,  and  both  are  expressed  in  price — the  interest 
is  added  to  the  principal  in  advance.     In  the  latter  case 


134  BISOCIALISM— ECONOMICS 

the  seine  sells  at  its  labor  value  as  expressed  in  cash  price, 
while  the  money-forms  borrowed  sell  for  a  limited  time  at 
their  capital  value  as  expressed  in  terms  of  interest.  The 
distinctive  utility  of  auxiliary  capital  is  its  fitness  to  assist 
labor-power  in  overcoming  the  disutility  of  matter;  its 
value  is  always  a  labor  value,  and  is  always  expressed  in 
price.  The  distinctive  utility  of  pure  capital  is  its  fitness 
to  overcome  the  disutility  of  time;  its  value  is  always  a 
capital  value  and  is  usually  expressed  in  terms  of  interest; 
but  whether  so  expressed  or  not,  it  is,  in  fact,  interest  or  its 
economic  equivalent. 

In  the  above  illustration  we  find  that  if  the  purchaser 
of  the  seine  buys  it  on  a  year's  time,  the  seller  adds  to  the 
cash  price  a  year's  interest  and  collects  it  as  a  part  of  the 
price  payable  at  the  end  of  the  year;  while  if  the  pur- 
chaser borrows  the  money  and  pays  the  present  cash  price 
for  the  seine,  he  pays  the  lender  the  interest  at  the  end 
of  the  year  as  interest.  In  either  case  the  effect  is  the 
same,  and  each  transaction  results  in  the  payment  by  the 
purchaser  of  the  labor-form  of  positive  economic  interest. 

In  another  class  of  transactions  economic  interest  ap- 
pears in  a  negative  form  very  similar  to  that  commonly 
called  commercial  discount.  In  many  business  enterprises 
a  long  time  must  necessarily  intervene  between  the  be- 
ginning of  a  given  product  or  project  and  its  completion. 
Let  us  assume  that  a  large  factory  is  to  be  built  and 
equipped  with  modern  machinery,  and  that  its  erection  and 
equipment  will  occupy  a  year's  time.  If  all  the  men 
enffaged  in  the  work  could  and  would  wait  until  the  end 
of  the  year  and  as  much  longer  as  might  be  necessary  for 


OF  THE  ORIGIN  OF  VALUES  135 

the  factory  to  pay  them  out  of  its  earnings,  their  daily 
wages  would  be  relatively  higher.  But  as  is  practically 
always  the  case  in  such  circumstances,  the  workmen  are 
paid  daily  or  weekly  or  monthly  wages  by  the  owners  of 
the  enterprise,  or  contractors  under  them,  and  the  owners 
wait  until  the  factory  is  in  operation  to  reimburse  them- 
selves for  their  outlay.  The  wages  paid  axe  consequently 
lower  than  they  would  be  under  the  arrangement  first 
suggested  by  the  amount  of  interest  at  current  rates  for 
the  average  time  to  elapse  between  the  payment  of  the 
wages  and  their  anticipated  reimbursement.  This  differ- 
ence in  wages  on  account  of  present  rather  than  future 
payment  is  economic  interest  in  the  form  of  discount  paid 
by  the  workmen  to  their  employers  for  present  rather  than 
future  enjoyment  of  the  results  of  their  labor-power.  The 
workmen  thus  avoid  the  disutility  of  time  at  the  expense 
of  their  employers  who  recoup  themselves  by  the  payment 
of  wages  lower  than  if  paid  at  a  future  time  out  of  the 
actual  earnings  of  the  enterprise. 

This  element  of  interest  in  the  form  of  discount  mani- 
fests itself  in  lower  prices  of  labor-forms  which  enter  into 
long-time  enterprises  as  well  as  in  lower  prices  for  labor- 
power,  or  wages.  Dealers  who  contribute  raw  materials 
or  labor-forms  of  any  kind  towards  the  construction  and 
equipment  of  such  a  factory  receive  a  smaller  cash  price 
for  their  products  than  if  they  waited  until  the  completion 
and  partial  operation  of  the  factory.  Economic  interest  is 
more  apparent  in  this  case  than  in  the  case  of  wages 
because  in  the  sale  of  labor-forms  a  commercial  discount 
for  cash,  measuring  the  economic  interest,  is  commonly 


136  BISOCIALISM— ECONOMICS 

allowed  upon  the  face  of  the  transaction;  while  in  the  sale 
of  labor-power  such  a  commercial  discount  is  practically 
unknown  as  between  employer  and  employe,  and  wages 
are  usually  payable  at  the  end  of  each  week,  fortnight,  or 
month,  and  are  lower  accordingly. 

From  these  illustrations  we  learn  that  there  is  a  dis- 
utility of  time;  that  pure  capital-forms  have  fitness  for 
mitigating  this  disutility;  and  that  for  this  reason  men 
pay  a  premium  for  their  immediate  possession  just  as 
readily  as  they  pay  a  price  for  auxiliary  capital-forms 
which  will  enable  them  to  overcome  more  readily  the  dis- 
utility of  matter;  and  that,  on  the  other  hand,  a  person 
who  has  acquired  labor-forms  has  a  choice  of  their  imme- 
diate and  direct  consumption  as  satisforms;  their  out  and 
out  sale  to  others  for  use  either  as  satisforms  or  auxiliary 
capital-forms;  their  limited  sale,  or  loan,  as  pure  capital- 
forms;  and  their  use  by  himself  as  capital-forms,  either 
auxiliary  or  pure.  In  case  they  are  used  by  himself  or 
another  as  pure  capital,  they  have  distinctively  a  capital 
value  which  is  measured  directly  or  indirectly  by  the  cur- 
rent rate  of  interest  for  capital-forms  put  to  similar  uses. 

We  also  learn  that  not  only  do  capital-forms  assume  a 
different  aspect  according  as  they  are  used  as  auxiliary 
capital  or  pure  capital,  but  that  pure  capital-forms  like- 
wise assume  a  different  aspect  according  as  they  are  used 
positively  or  negatively — according  as  they  are  measured 
in  the  market  by  commercial  interest  or  commercial  dis- 
count, or  their  commercial  equivalents  as  additions  to  or 
deductions  from  current  prices  of  labor-power  and  labor- 
forms. 


OF  THE  ORIGIN  OF  VALUES  13? 

The  value  of  a  land-form  is  neither  labor  value  nor 
capital  value.  It  is  not  the  resultant  of  the  utility  of 
labor-power  or  capital-forms  applied  to  overcome  any  dis- 
utility of  the  land-form.  This  may  be  seen  from  the  fact 
that  vacant  land-forms  upon  which  not  a  stroke  of  labor, 
(ir  a  dollars  worth  of  capital  has  ever  been  expended, 
may  acquire  enormous  value,  if  well  located  in  a  populous 
community.  The  origin  of  the  value  of  a  vacant  lot  or 
of  any  land-form  irrespective  of  the  improvements  thereon 
must  be  sought  elsewhere  than  in  the  utility  of  particular 
labor-power  and  capital-forms.  The  commercial  utility,  or 
value,  of  any  land-form  depends,  primarily,  upon  its  loca- 
tion with  reference  to  population;  secondarily,  upon  its 
natural  utility.  The  most  fertile  spot  on  the  earth  may 
be  valueless,  if  far  from  any  civilized  community,  or,  for 
any  reason,  inaccessible.  On  the  other  hand,  the  most 
barren  spot  may  be  of  almost  fabulous  value  for  building 
purposes,  if  situated  in  the  heart  of  a  great  city. 

x\ll  land-forms  of  value  have  utility  enough  of  one  or 
both  kinds  to  cause  competition  for  their  possession  and 
use.  This  leads  to  the  manifestation  of  the  distinctive 
disutility  of  land-forms.  It  arises,  not  from  the  resistance 
of  matter  nor  the  irksomeness  of  waiting,  but  from  the 
physical  fact  that  two  human  beings  can  not  have  the 
exclusive  occupancy,  use  or  control  of  the  same  land-form 
at  the  same  time.  Impenetrability — that  property  of 
matter  by  virtue  of  which  two  bodies  can  not  occupy  the 
.<ame  space  at  the  same  time — manifests  itself  in  Eco- 
nomics as  well  as  in  Physics.  If  all  men  with  equal  facility 
could  occupy  and  enjoy  the  utilities  of  the  same  land-form 


138  BISOCIALISM— ECONOMICS 

at  the  same  time,  no  land-form  would  acquire  any  value, 
however  fertile  it  might  be;  for  all  men  could  appropriate 
it  and  enjoy  all  its  utiUties  with  equal  disutilities.  But 
if  all  land-forms  were  of  equal  fertility,  all  could  not  be 
at  the  centers  of  population  and  exchange.  All  stores 
could  not  be  on  the  public  square;  nor  could  all  farms  be 
equally  distant  from  post-office  and  railroad  station.  A 
farm  growing  an  average  of  15  bushels  of  wheat  per  acre, 
but  near  a  market,  may  be  of  greater  value  than  one  of 
equal  size  growing  20  bushels  per  acre  farther  away. 

The  disutility  which  arises  in  the  use  of  land-forms  is 
the  disutility  of  space.  We  are  acquainted  with  this  dis- 
utility through  the  physical  phenomena  of  distance  and 
impenetrability.  With  reference  to  distance,  it  manifests 
itself  to  us  through  the  irksomeness  of  travel  and  transpor- 
tation; with  reference  to  impenetrability,  in  the  irksome- 
ness of  standing  aside.  It  is  one  thing  to  be  deprived  of 
the  use  and  occupation  of  a  given  grade  of  land-forms 
when  such  grade  does  not  exist  in  a  particular  community; 
but  it  is  quite  a  different  thing  to  be  deprived  of  such 
use  and  occupation  when  and  where  such  land-forms  do 
exist  and  are  exclusively  used  and  occupied  by  others. 
The  irksomeness  of  standing  aside  while  another  occupies 
and  enjoys  is  a  real,  tliough  intangible,  irksomeness,  sim- 
ilar in  that  respect  to  the  irksomeness  of  waiting. 

The  more  travel  and  transportation  necessarily  involved 
in  the  occupancy  and  use  of  a  given  land-form  with 
reference  to  market  and  other  advantages  furnished  by 
society,  the  less  valuable  the  land-form;  and  the  greater 
the  distance  one  stands  from  these  advantages,  the  less 


OF  THE  ORIGIN  OF  VALUES  139 

value  the  land-form  which  he  occupies.  Inversely,  the 
value  of  an  advantageous  land-form  does  not  result  from 
irksomeness  in  the  possession  and  use  thereof,  but  from 
the  comparative  absence  of  irksomeness.  It  is  the  dis- 
utility which  may  be  avoided  and  not  that  which  is 
engendered  by  the  possession,  use  or  control  of  a  well 
situated  land-form  which  gives  it  value  in  so  far  as  the 
factor  of  disutility  is  concerned.  The  irksomeness  of 
travel,  transportation  and  standing  aside  may  all  be 
avoided  or  reduced  by  the  occupancy  of  a  well  situated 
land-form. 

The  man  who  desires  to  occupy  some  land-form  as 
owner  must  either  dispossess  the  present  owner  of  a  land- 
form  near  to  market,  or  otherwise  well  situated,  or  he 
must  undergo  the  continuing  disutility  of  transportation 
of  person  and  property  which  necessarily  attends  the  occu- 
pation and  use  of  a  land-form  far  from  market,  or  other- 
wise ill  situated,  as  well  as  the  continuing  disutility  of 
seeing  another  possess  and  enjoy  desired  advantages  from 
which  he  is  debarred.  In  countries  where  land  laws  sim- 
ilar to  ours  prevail  the  present  owner  is  dispossessed,  not 
by  force,  but  by  purchase;  by  inducing  him  to  relinquish 
his  claim  upon  a  certain  area  of  the  earth's  surface;  for 
in  Economics,  as  in  the  law,  the  right  to  superficial 
area  of  land-forms  carries  with  it  the  exclusive  control 
of  all  terrestrial  space  above  and  below,  and  all  the  forces, 
resources  and  opportunities  of  nature  therein  contained. 
The  disutility  in  the  acquisition  of  land-forms  is  therefore 
the  disutility  of  space.  For,  although  the  problem  of  the 
purchaser  in  acquiring  a  desirable  land-form  just  at  hand 


140  BISOCIALISM— ECONOMICS 

is  the  dispossession  of  the  present  owner,  this  is  but  inci- 
dent to  the  fact  that  both  can  not  occupy  or  exclusively 
control  the  same  space  at  the  same  time.  And  if  instead 
of  purchasing  the  more  desirable  land-form,  a  man  con- 
cludes to  occupy  one  upon  the  margin,  the  disutilities  of 
travel,  transportation  and  standing  aside  which  he  under- 
goes are  also  but  exemplifications  of  space  relations. 

All  things  which  are  produced  by  the  exertion  of  labor- 
power  necessarily  involve  the  disutility  of  matter  and  of 
time.  Production  consists  simply  of  changes  wrought  by 
labor-power  upon  material  objects,  and  these  changes  im- 
ply the  passing  of  time.  Land-forms,  as  we  have  defined 
them,  can  neither  be  produced  nor  reproduced  by  labor- 
power,  so  that  no  disutility  of  matter  or  of  time  can  affect 
their  value  directly  or  indirectly.  In  the  competition  of 
the  land  market  two  factors  arise  with  reference  to  every 
land-form — its  natural  utility,  whether  arising  from  fer- 
tility or  location — and  the  disutility  attending  terrestrial 
space.     The  resultant  is  land  value. 

Land  Value  is  that  value  which  is  distinctively  the  re- 
sultant of  the  utility  of  land-forms  and  the  disutility  of 
space. 

Although  a  land-form  in  Economics  and  in  law  involves 
the  three  space  dimensions — length,  breadth  and  thickness 
— we  usually  think  only  of  length  and  breadth.  A  title 
deed  carries  with  the  land  conveyed  the  exclusive  right  to 
the  air  above  and  the  earth  (to  the  center)  beneath,  yet 
the  description  given  is  of  so  much  length  and  breadth 
upon  the  surface.    The  land  question  at  bottom  is  a  ques- 


OP  THE  ORIGIN  OP  VALUES  141 

tion  of  standing  room — standing  room  accessible  to  the 
market. 

The  matters  discussed  in  this  chapter  naturally  lead  to 
the  question  of  wages,  interest  and  ground  rent.  We  will 
not,  however,  stop  to  discuss  them  here  as  they  may  be  more 
comprehensively  treated  in  another  place.  It  may  be  well 
to  state  in  passing  that  wages,  interest  and  rent  are  not  mat- 
ters of  quantity,  but  of  value.  Wages  is  labor  value;  in- 
terest is  capital  value;  and  ground  rent  is  land  value  de- 
termined in  the  market  at  the  point  of  exchange,  and  ex- 
pressed in  terms  of  money.  We  shall  now  examine  and 
classify  values  with  reference  to  their  distribution. 


CHAPTER  XII. 

OF   MARGINAL  AND   DIFFERENTIAL   VALUES. 

The  imperfection  of  equality  of  competition  may  be  met 
and  overcome  by  securing  equality  of  opportunity  for  indi- 
viduals. John  A.  Hobson. 

We  have  seen  that  the  market  price  and,  consequently, 
the  value  of  labor-forms  is  fixed  by  the  competition  of  the 
marginal  pair.  Men  do  not  sell  cheap  because  they  have 
acquired  their  wares  at  relatively  small  disutility,  nor  pay 
high  prices  because  they  are  abundantly  able  to  do  so. 
The  seller,  however  fortunate  in  the  acquisition  of  his 
trade-form,  gets  all  he  can,  but  is  bound  by  the  price  fixed 
by  that  seller  who,  having  a  supply  sufficient  to  affect  the 
entire  market,  is  most  anxious  to  sell.  While  the  buyer, 
however  well  to  do,  buys  as  cheap  as  he  can,  and  pays  only 
the  price  bid  by  that  buyer  who,  being  necessary  to  ex- 
haust the  market  supply,  is  most  indifferent.  We  shall 
now  examine  those  conditions  which  determine  the  iden- 
tity of  the  marginal  seller  and  the  marginal  buyer,  respec- 
tively, and  tend  to  produce  anxiety  in  the  one  and  indif- 
ference in  the  other;  it  being  understood  that  the  marginal 
pair  are  representatives  of  marginal  groups  of  sellers  and 
buyers,  respectively. 

With  reference  to  the  seller  we  may  state  that  in  normal 
conditions  and  in  the  long  run  a  man  will  not  sell  labor- 
forms  at  less  than  their  industrial  disutility.  The  great 
desideratum  to  the  seller  is  net  value,  and  in  all  economic 

142 


MARGINAL  AND  DIFFERENTIAL  VALUES         1  13 

exchanges  more  or  less  net  value  is  acquired.  Unless  the 
point  of  exchange  is  above  the  point  of  industrial  disutility, 
production  in  any  given  case  must  soon  cease  and  the  ex- 
changes made  are  abnormal. 

All  production  results  from  the  application  of  labor- 
power  (directly,  or  indirectly  by  the  use  of  capital-forms) 
to  land-forms.  This  is  readily  seen,  if  we  consider  care- 
fully the  fact  implied  in  the  definitions  already  given  that 
the  external  world  at  any  given  time  consists  entirely  of 
land-forms  and  labor-forms.  All  labor-forms  used  in  fur- 
ther production  either  as  aid-forms  or  as  partly  finished 
material  are  capital-forms;  while  land-forms,  by  definition, 
include  not  only  what  we  usually  call  land,  but  all  the  op- 
portunities, forces  and  resources  of  nature  connected  there- 
with or  available  thereon.  Therefore  by  eliminating  cap- 
ital (labor-forms)  from  the  productive  process  we  have  left 
only  labor-power  upon  the  one  side  and  land-forms  upon 
the  other.  By  introducing  capital  into  the  process  we 
merely  assist  labor-power  or  mitigate  the  disutility  of  time. 

We  may  state,  further,  that  the  disutilities  of  production 
are  greater  on  some  land-forms  than  on  others;  that  a  defi- 
nite number  of  land-forms  are  necessarily  used  to  supply 
the  demand  of  a  given  market,  and  that  some  seller  must 
produce  upon  the  poorest  land-form  necessarily  used  to 
supply  the  demand  of  such  market.  His  disutility  is 
greatest  of  all,  and  the  gross  value  of  a  given  product  be- 
ing the  same  for  all  in  the  common  market,  he  necessarily 
receives  the  least  net  value  of  all  the  sellers  of  such  product 
in  that  market.  The  land-form  upon  which  he  produces  is 
the  marginal  land-form,  and  he  is  the  marginal  producer. 


144  BISOCIALISM— ECONOMICS 

Usually  several  land-forms  are  so  situated  or  conditioned 
with  reference  to  the  market  that  their  net  values  from 
a  given  expenditure  of  labor-power,  assisted  by  given  cap- 
ital-forms, are  substantially  equal.  These  land-forms  con- 
stitute the  economic  margin.  All  producers  who  occupy 
the  economic  margin  constitute  the  marginal  group  in  pro- 
duction. 

The  Marginal  Land-Form  with  respect  to  a  given  mar- 
ket is  a  land-form  upon  which  given  labor-power,  assisted 
by  given  capital-forms,  will  produce  the  least  net  value  of 
any  land-form  necessarily  used  to  supply  such  market. 

The  Economic  Margin  of  a  given  market  is  the  aggre- 
gate of  all  marginal  land-forms  which  are  tributary  to  such 
market. 

It  must  be  understood  that  the  economic  margin  is  dis- 
tinctively an  economic,  and  not  a  territorial  boundary.  A 
land-form  may  be  very  near  a  great  market,  territorially, 
and  yet  be  upon  its  margin  economically,  while  other  land- 
forms,  territorially  very  distant  may  be  far  above  the  eco- 
nomic margin.  Liverpool  is  the  world's  market  for  wheat; 
yet  some  of  the  best  wheat  lands  are  on  the  other  side  of 
the  globe,  and  some  of  the  poorest  near  at  hand.  A  land- 
form  in  England  and  one  in  Dakota  yielding  the  marginal 
return  in  the  production  of  wheat  for  the  Liverpool  market 
are  hoth  upon  its  economic  margin.  All  land-forms, 
wheresoever  situated,  which  yield  the  marginal  return  for 
land-forms  tributary  to  any  given  market,  constitute  its 
economic  margin;  while  any  land-form,  wheresoever  situa- 
ted, which  jields  more  than  the  marginal  return  for  land- 
forms  tributary  to  such  market,  is  a  superior  land-form. 


MARGINAL  AND  DIFFERENTIAL  VALUES         145 

The  Marginal  Return  is  the  value  which  may  be  ac- 
quired with  a  given  disutility  upon  the  economic  margin. 

A  Superior  Land-Form  is  any  land-form  which,  with  the 
same  disutility,  yields  more  than  the  marginal  return. 

A  Marginal  Producer  is  one  who  produces  upon  a  mar- 
ginal land-form. 

The  Marginal  Group  of  producers  embraces  all  who  pro- 
duce upon  the  economic  margin. 

In  any  market  it  is  inevitable  that,  as  a  rule,  the  mar- 
ginal producer  of  a  given  labor-form  is  also  its  marginal 
seller.  He  is  the  seller  least  able  and  least  likely  to  stand 
out  against  the  competition  of  the  market.  This  being 
true,  it  follows  that  the  marginal  land-form  furnishes  the 
conditions  which  determine  the  identity  of  the  marginal 
seller  and  fixes  market  values  in  so  far  as  they  are  af- 
fected upon  the  seller's  side  of  the  market.  It  should  be 
remembered  that  the  disutility  of  the  marginal  land-form 
determines,  primarily  and  directly,  not  the  selling  price 
of  a  given  labor-form,  but  the  question  of  whether  or  not 
such  la.bor-form  shall  be  produced  for  sale.  It  is  only 
secondarily  and  indirectly  that  such  disutility  affects  price 
by  gauging  the  supply.  After  the  labor-form  has  entered 
the  market,  the  question  of  the  disutility  of  its  production 
is  of  minor  importance.  The  "labor-cost"  theory  of  value 
as  currently  stated  in  this  regard  is  a  superficial  statement 
of  a  half  truth.  It  is  true  only  upon  one  side — and  that 
the  least  effective  side — of  the  market.  After  a  labor-form 
has  been  produced  and  is  upon  the  market,  the  marginal 
buyer  is  the  primary  factor  in  fixing  the  price. 

With  reference  to  the  marginal  buyer  it  may  be  said 


146  BISOCIAUSM— ECONOMICS 

that  his  indift'erence  does  not  arise  from  the  fact  that  he 
has  but  little  actual  desire  for  the  labor-form  in  question, 
but  from  the  fact  that,  compared  with  all  of  the  things  de- 
sired by  him  which  he  is  able  to  buy,  his  desire  for  this 
particular  labor-form  is  relatively  small.  If  his  ability  to 
purchase  were  doubled,  he  might  quickly  purchase  it,  and 
his  marginal  labor-form  would  be  worth  approximately 
one-half  as  much.  Men  at  the  margin  do  not  buy  to  the 
limit  of  their  desires,  but  to  the  limit  of  their  pocket 
books.  This  latter  limit  is  determined  by  the  buyers'  suc- 
cess in  the  acquisition  of  property  or  money  through  in- 
dustry for  use  in  exchange.  This  leads  us  again  to  con- 
sider the  fact  that  all  production  results  from  the  applica- 
tion of  labor-power,  directly  or  indirectly,  to  land-forms; 
and  that  the  disutilities  of  production  are  greater  on  some 
land-forms  than  on  others. 

Some  buyer,  therefore,  must  acquire  his  ability  to  pur- 
chase by  the  use  of  the  poorest  land-form  necessarily  used 
in  his  community.  Since  his  disutility  is  greatest  of  all, 
and  since  the  market  price  of  labor-forms  such  as  he  pro- 
duces is  the  same  for  all,  he  necessarily  receives  the  least 
net  value  for  his  exertion,  and  must  be  indifferent,  so  far 
as  effective  demand  is  concerned,  to  more  things  in  the 
market  than  any  one  else  in  that  market.  He  must  con- 
fine his  purchases  to  things  which  are  within  the  value  of 
what  he  has  to  sell.  His  sales  and  his  purchases  as  a  whole 
are  necessarily  economic  equivalents.  The  marginal  buyer 
in  normal  conditions  must  be  as  well  circumstanced  as  the 
marginal  seller,  and  the  probabilities  are  that  he  will  be 
no  better  circumstanced.    Both  will  produce  their  respec- 


MARGINAL  AND  DIFFERENTIAL  VALUES         147 

tive  labor-forms  upon  the  same  economic  margin,  and  their 
products  will  be  economic  equivalents. 

After  a  given  labor-form  has  been  put  upon  the  market 
its  value  is  determined  by  the  ability  to  purchase  of  a  per- 
son who  has  produced  another  labor-form  upon  the  same 
economic  margin.  The  indifference  of  the  marginal  buyer 
determines  market  price,  but  this  indifference  is  itself  de- 
termined by  the  net  value  which  may  be  acquired  upon 
the  economic  margin.  It  is,  therefore,  to  the  interest  of 
every  producer  that  the  marginal  producers  of  all  other 
labor-forms  should  occupy  tli-  best  possible  marginal  land- 
forms.  For  the  men  at  the  margin  will  then  produce  with 
the  smallest  possible  disutility  and  can  sell  their  products 
at  comparatively  low  prices  and  still  acquire  substantial  net 
value.  With  this  net  value  they  will  reenter  the  market 
as  buyers  and  evince  an  effective  demand  for  the  labor- 
forms  produced  by  others.  And  since  the  marginal  pro- 
ducers become  the  marginal  sellers  and  buyers,  respectively, 
and  so  fix  market  prices  for  all,  it  follows  that  every  man 
in  normal  conditions  is  directly  interested  in  the  welfare 
of  those  who  produce  at  the  margin. 

As  has  been  said,  the  problem  of  the  producer  is  the 
acquisition  of  net  value.  Net  value  lies  between  two  mov- 
able points,  the  point  of  positive  utility  and  the  point  of 
exchange.  If  net  value  is  to  be  increased,  it  must  be  by 
the  lowering  of  the  former,  or  by  the  raising  of  the  latter 
point.  We  shall  first  consider  the  means  by  which  the 
point  of  positive  utility  may  be  lowered  in  production. 
The  disutilities  to  be  reduced  are  those  of  matter,  time, 
and  ?pae('.     Tlic  n(i]itie-  l>v  which  tho  reduction  mav  bo 


148  BISOCIALISM— ECONOMICS 

accomplished  are  those  of  labor-power,  capital-forms,  and 
land-forms. 

The  use  of  more  effective  labor-power  in  the  form  of 
skill  or  ability,  or  both,  lowers  the  point  of  positive  utility 
to  the  user.  In  competition  with  others  in  the  open  mar- 
ket he  has  by  this  means  an  advantage.  This  advantage 
he  can  enjoy  so  long  as  his  skill  or  ability  continues  to 
be  exceptional.  But  since  all  men  naturally  seek  to  satisfy 
their  desires  with  the  least  exertion,  the  exercise  of  ex- 
ceptional skill  or  ability  upon  the  part  of  one  man  tends  to 
incite  all  others  to  the  acquirement  of  like  advantages. 
And  those  who  can  not  acquire  skill  or  ability  of  the  same 
kind  and  degree  are  moved  to  seek  improvement  along 
some  other  line.  In  this  way  a  system  of  specialized  in- 
dustry develops,  each  man  tending  to  do  that  which  he  can 
perform  with  the  least  disutility  or  the  most  effectiveness, 
knowing  that  by  the  exchange  of  labor-forms,  in  normal 
conditions,  he  can  secure  in  satisforms  suited  to  his  needs 
the  full  economic  equivalent  of  his  product. 

The  natural  outgrowth  of  specialization  in  industry  in 
which,  at  first,  each  man  makes  an  entire  labor-form  of  a 
particular  kind,  as  a  coat  or  an  ax,  is  a  system  of  division 
of  labor  in  which  each  man  makes  but  a  part,  and  often 
but  a  very  small  part,  of  the  completed  labor-form.  Thus 
in  divers  ways,  the  special  skill  of  the  individual  is  neutral- 
ized and  the  point  of  positive  utility  lowered  by  his  com- 
petitors. And  inasmuch  as  the  lessening  of  the  dis- 
utility of  production  tends  to  increase  the  amount  of  the 
product  thrown  upon  the  market,  the  anxiety  of  the  mar- 
ginal seller  is  increased  and  the  point  of  exchange  is  there- 


MARGINAL  AND  DIFFERENTIAL  VALUES         14*J 

by  lowered.  In  a  free  and  open  market  the  resulting  net 
value  to  the  individual  producer  tends  to  diminish,  al- 
though the  advantages  of  special  skill  are  always  great 
enough  to  encourage  further  individual  development.  Pur- 
chasers are  always  benefited  by  increased  production 
brought  about  by  superior  skill,  and  the  individual  skill 
of  the  producer  increases  his  net  values  without  adding  to 
the  cost  or  other  disutility  of  any  other  person. 

Not  only  does  the  competition  among  men  engendered 
by  differences  of  skill  and  ability  incite  them  to  a  further 
development  of  labor-power,  but  it  leads  them  to  supple- 
ment their  labor-power  by  the  use  of  auxiliary  capital- 
forms.  All  that  has  been  said  with  respect  to  the  use  of 
exceptional  labor-power  applies  equally  well  to  the  use  of 
capital-forms.  This  is  naturally  true,  inasmuch  as  capital- 
forms  represent  the  stored  up  utility  of  labor-power.  The 
purpose  of  acquisition  of  capital-forms  is  the  same  as  that 
of  the  acquisition  of  superior  personal  skill  and  ability; 
the  results  of  the  use  of  one  and  the  exertion  of  the  other 
are  the  same  upon  all  the  parties  concerned. 

The  use  of  capital-forms  in  production  tends  to  stimu- 
late invention  along  all  lines;  it  tends  to  specialize  indus- 
try along  the  line  of  particular  inventions;  it  tends  greatly 
to  the  encouragement  and  development  of  division  of  labor ; 
it  tends  to  lower  the  point  of  exchange  of  the  labor-forms 
produced,  and  tends  to  diffuse  among  purchasers  or  con- 
sumers many  of  the  advantages  of  the  use  of  auxiliary 
capital-forms  in  production  through  the  socialization  of 
utility. 

Tf  an  individual  producer  makes  use  of  pure  capital- 


150  BISOCIALISM— ECONOMICS 

forms  to  enable  him  to  reduce  the  disutility  of  time,  the 
special  advantage  gained  by  him  is  but  temporary.  In 
normal  conditions  all  may  use  capital-forms  according  to 
their  abilities,  and  the  result  is  that  the  price  of  pure  cap- 
ital as  expressed  in  current  interest  rates  is  fixed  by  the 
marginal  user  of  pure  capital  who.  for  the  same  reason  that 
he  is  the  marginal  buyer  of  labor-forms,  is  the  man  who 
produces  at  the  margin.  In  normal  conditions,  the  ad- 
vantages of  the  use  of  capital-forms  and  of  more  effective 
labor-power  are  diffused  by  advancement  in  the  indus- 
trial arts  and  by  the  lowering  of  prices  and  rates  of  in- 
terest, so  that  even  the  marginal  producers  share  therein. 
The  market  prices  of  labor-forms  and  of  interest  rates,  in 
such  conditions,  tend  to  a  general  level  which  reflects  the 
economic  welfare  of  the  marginal  pair.  The  disutilities  of 
all  men  are  reduced  to  the  lowest  limit  and  all  utilities 
tend  toward  spontaneity. 

There  can  be  no  production  of  labor-forms  without  the 
use  of  land-forms.  A  labor-form  is  in  reality  a  land-form 
which  has  been  so  changed  in  form  or  position,  or  both, 
by  the  expenditure  upon  it  of  labor-power  that  its  present 
distinctive  utility  is  the  result  of  the  labor-power  thus  ex- 
pended. 

The  utilities  of  land-forms  for  the  production  of  labor- 
forms  differ  greatly.  In  some  cases  the  difference  is  partly 
one  of  fertility,  but  in  all  cases  there  is  a  difference  of  site 
or  locality  with  reference  to  market  which  manifests  it- 
self in  value.  The  man  who,  in  producing  labor-forms, 
occupies  a  land-form  which,  with  like  fertility,  is  superior 
to  that  occupied  by  others  in  location,  is  enabled  to  place 


MARGINAL  AND  DIFFERENTIAL  VALUES  151 

his  trade-forms  upon  the  market  with  less  disutihty  than 
his  competitors.  The  same  is  true  if  his  land-form,  with 
like  location,  is  superior  to  that  of  others  in  fertility.  By 
selling  at  the  market  price,  which  is  the  same  for  all,  he 
])ossesses  an  increment  of  net  value  which  the  others  do 
not.  The  point  of  disutility  is  lowered  as  to  him  by  virtue 
of  the  superior  utility  of  his  land-form. 

In  considering  the  cases  of  the  use  of  exceptional  labor- 
power  and  of  capital-forms  we  found  that  the  tendency  is 
to  induce  all  to  increase  their  skill  and  ability,  and  to  lead 
to  the  general  acquisition  and  use  of  capital-forms.  A  man 
simply  by  acquiring  superior  skill  can  not  long  retain  an 
advantage  over  his  fellows.  Others  will  soon  reach  his  at- 
tainments, and  if  he  still  further  increases  his  skill,  the  in- 
creased attainments  of  others  will  closely  follow.  All  can 
not  be  equally  skillful  or  powerful,  nor  can  all  acquire  and 
use  capital-forms  to  the  same  extent  or  with  equal  advan- 
tage. But  a  given  expenditure  of  labor-power  and  a  given 
use  of  capital-forms  will  bring  the  same  reward  if  applied 
upon  land-forms  of  equal  utility. 

The  law  of  the  market  by  which  all  obtain  labor-forms 
at  prices  fixed  by  the  marginal  pair  causes  the  benefits 
of  extra  production  to  be  diffused  in  lower  prices  among 
all  the  buyers  of  the  community.  But  if  given  labor-power 
and  capital-forms  are  applied  upon  land-forms  of  unequal 
utilities,  the  resulting  net  values  are  unequal.  And  while 
the  advantage  of  the  use  of  superior  land-forms  tends  to 
incite  a  desire  in  all  other  persons  to  acquire  and  occupy 
similar  land-forms,  there  faces  them  the  fact  of  nature  that 
the    number    of    such    land-forms  is  limited,   and  it  is 


152  BISOCIALISM— ECONOMICS 

not  within  the  range  of  human  effort  to  increase  them. 
Personal  skill  and  ability  may  be  increased  until  the  re- 
sults are  marvelous;  capital-forms  may  be  multiplied  until 
both  in  number  and  variety  they  are  well  nigh  countless; 
but  irrespective  of  improvements — and  improvements  are 
not  land-forms — land-forms  can  not  be  created.  They  are 
the  gift  of  nature,  and  any  changes  or  improvements  made 
upon  them  or  out  of  them  by  labor-power  are  labor-forms. 
This  distinction  must  be  clearly  seen  and  constantly  kept 
in  mind  in  all  economic  discussion. 

With  increase  of  population  the  competition  for  land- 
forms,  instead  of  increasing  their  number,  forces  into  use 
those  of  inferior  utility,  and  this  increases  the  value  of  su- 
perior land-forms.  As  the  pressure  of  population  increases 
the  buyer  of  land-forms  becomes,  not  indifferent,  but  anx- 
ious; while  the  seller's  anxiety  changes  to  indifference. 
The  same  cause — increase  of  population — which  in  the  case 
of  labor-forms  tends  to  produce  a  general  market  with 
equality  of  net  values,  tends  in  the  case  of  land-forms  to 
a  one-sided  market,  with  inequality  of  net  values. 

It  is  necessary  for  us  henceforth  to  distinguish  between 
common  and  superior  labor-power.  The  former  is  labor- 
power  exerted  with  only  ordinary  skill,  energy  or  ability, 
and  without  the  use  of  auxiliar)'  capital-forms.  The  lat- 
ter is  labor-power  exerted  with  more  than  ordinary  skill, 
energy  or  ability,  or  with  the  use  of  auxiliary  capital-forms, 
or,  commonly,  with  both. 

We  have  already  seen  that  auxiliary  capital-forms  are 
simply  products  of  labor-power  and  represent  its  stored  up 
utility.    From  another  point  of  view  the  relation  between 


MARGINAL  AND  DIFFERENTIAL  VALUES         153 

labor-power  and  capital-forms  is  equally  plain.  Labor- 
power  includes  not  only  the  physical  but  the  mental  powers 
of  man  when  irksomely  exerted  for  the  satisfaction  of  de- 
sire. Superiority  in  the  exertion  of  labor-power  is  a  mat' 
ter  of  mind  rather  than  muscle,  and  this  is  especially 
true  when  the  object  sought  is  the  satisfaction  of  desire 
through  the  use  of  capital-forms.  It  is  by  the  exercise 
of  superior  labor-power  that  capital-forms  are  thought  out 
and  produced  in  the  first  instance;  by  superior  labor-power 
they  are  saved,  collected  and  made  ready  for  future  use, 
and  by  superior  labor-power  they  are  finally  put  to  use. 
The  production,  conservation  and  use  of  capital-forms  al- 
ways involve  an  exercise  of  personal  skill,  energy  and  abil- 
ity. In  so  far,  therefore,  as  the  use  of  capital-forms  is 
merely  auxiliary  to  labor-power  and  does  not  involve  a  re- 
duction of  the  disutilities  of  time  it  is  merely  an  exercise 
of  superior  labor-power. 

Common  Labor-Power  is  labor-power  exerted  with  only 
ordinary  skill,  energy  or  ability,  and  unattended  by  the 
use  of  capital-forms. 

Superior  Labor-Power  is  labor-power  exerted  with  more 
than  ordinary  skill,  energy  or  ability,  or  attended  by  the 
use  of  auxiliary  capital-forms,  or  both. 

In  ordinary  circumstances  the  producer  upon  the  eco- 
nomic margin  exerts  common  labor-power.  Upon  the  mar- 
gin, also,  is  found  a  dearth,  if  not  an  utter  absence  of  capi- 
tal-forms. 

Let  us  assume  that  on  the  marginal  land-form  of  a 
given  community  a  day's  common  labor-power  will  pro- 
duce a  lal)or-form  of  the  value  of  one  dollar  and  fifty  cents, 


154  BISOCIALISM— ECONOMICS 

and  that  the  disutility  of  such  labor-power  is  represented 
by  fifty  cents.  Then  the  net  value  of  such  day's  labor- 
power  is  one  dollar.  Upon  another  and  superior  land- 
form  in  that  community  labor-power  of  like  disutility  will 
produce  two  labor-forms  of  like  kind  as  the  first,  and 
hence,  of  the  value  in  that  market  of  three  dollars.  Here 
the  net  value  is  two  dollars  and  fifty  cents.  When  the 
two  occupants  dispose  of  their  products  each  pockets  his 
net  value,  and  one  acquires  two  and  a  half  times  as  much 
as  the  other  with  the  same  disutility.  The  principle 
underlying  this  illustration  is  universal  in  its  operation. 
The  market  price  of  any  product  is  fixed  by  the  marginal 
pair  and,  in  normal  conditions,  is  the  same  for  all  sellers  in 
a  given  market.  The  producer  upon  a  marginal  land-form 
is  the  marginal  seller,  and  a  producer  of  some  other  labor- 
form  upon  another  marginal  land-form  is  the  marginal 
buyer.  In  the  interchange  of  the  market  the  net  values 
of  all  marginal  producers  are  substantially  equal;  while 
above  the  margin  the  net  values  of  different  producers,  in 
normal  conditions,  vary  according  to  the  efficiency  of  their 
labor-power,  their  use  of  pure  capital-forms,  and  the  utili- 
ties of  their  respective  land-forms.  Through  all  net 
values,  wheresoever  produced,  there  may  be  drawn  a  line, 
horizontally  as  it  were,  which  will  separate  those  values 
which  are  only  equivalent  to  the  marginal  return  to  com- 
mon labor-power  from  those  which  exceed  it.  The  former 
are  marginal  and  the  latter  differential  net  values. 

Marginal  Net  Values  are  net  values  which  are  only 
equal  to  the  net  marginal  return  to  common  labor-power. 


MARGINAL  AND  DIFFERENTIAL  VALUES         155 

Differential  Net  Values  are  net  values  which  exceed  the 
net  marginal  return  to  common  labor-power. 

Marginal  net  values  are  economic  equivalents  and,  so  far 
as  they  are  received,  all  men  fare  alike.  Beyond  these 
lie  differential  values  of  various  kinds.  The  present  day 
struggle  in  the  industrial  and  commercial  worlds  is  for  the 
attainment  of  differential  net  values.  Although  these  values 
assume  many  different  forms  their  sources  are  but  five;  the 
use  of  superior  labor-power,  the  use  of  capital-forms,  the 
use  of  superior  land-forms,  the  possession  of  franchises, 
and  the  possession  of  monopolies.  These  five  sources  re- 
sult respectively  in  differential  net  values  of  five  classes: 
differential  labor  values,  capital  values,  land  values,  fran- 
chise values,  and  monopoly  values.  This  classification  is 
of  great  importance,  as  upon  it  is  based  the  conclusions  of 
Economics  upon  the  ultimate  question  of  that  science — the 
question  of  the  distribution  of  values. 

Differential  Labor  Values  are  differential  net  values 
which  distinctively  result  from  the  use  of  superior  labor- 
power. 

It  must  be  remembered  that,  by  definition,  superior  la- 
bor-power includes  all  labor-power  when  assisted  by  the 
use  of  auxiliary  capital-forms.  It  will  be  seen,  moreover, 
that  all  capital  values  are  differential,  they  being  in  excess 
of  the  marginal  return  to  common  labor-power. 

For  convenience  we  shall  sometimes  omit  the  words  "net 
value"  in  connection  with  the  term  '^differential,"  as  the 
meaning  will  always  readily  be  understood.  Thus  the 
term  "labor  differential"  will  be  understood  to  mean  dif- 
ferential not  value  resulting  from  the  use  of  superior  labor- 


156  BISOCIAUSM—ECONOMICS 

power;  'land  dijfferential,"  differential  net  value  resulting 
from  the  use  of  a  superior  land-form,  etc.,  thus  bringing 
into  use  without  further  explanation  the  terms  "capital  dif- 
ferential," "franchise  differential"  and  "monopoly  differ- 
ential," all  of  these  terms  referring  to  differential  net  val- 
ues and  indicating  their  sources. 


CHAPTER  XIII. 

OF  GROUND  RENT  AND  GROUND  VALUE. 

The  part  played  by  rent  in  the  problems  of  poverty  can 
scarcely  be  overestimated.  John  A.  Hobson. 

It  must  be  noted  that  the  normal  marginal  land-form 
of  any  market  is  not  the  least  productive  land-form  in  use, 
but  the  least  productive  one  necessarily  used  to  supply  the 
demand  of  such  market.  In  normal  conditions  no  one 
would  occupy  a  poorer  land-form  than  the  natural  scarcity 
required.  But  under  a  system  which  encourages  the  appro- 
priation of  land-forms  from  which  there  is  not  present 
adequate  return,  but  from  which  great  values  are  expected 
in  the  future,  it  frequently  happens  that  the  producers 
who  occupy  the  poorest  land-forms  are  far  beyond  the  nor- 
mal economic  margin.  Some  of  these  occupants  expect 
a  greater  future  return  to  compensate  them  for  their  pres- 
ent lack  of  adequate  net  values,  and  voluntarily  go  into 
the  wilderness  and  forestall  progress  by  taking  up  the  best 
land-forms  in  advance  of  the  needs  of  society;  but  the  great 
majority  of  the  occupants  of  an  artificially  depressed  eco- 
nomic margin  are  driven  there  from  the  fact  that  many 
superior  land-forms  are  held  out  of  use  by  their  owners 
for  speculative  purposes,  and  thus  the  normal  economic 
margin  is  not  available  for  use  by  the  normally  marginal 
laborers. 

The  artificial  depression  of  the  economic  margin  by  the 
157 


158  BISOCIALISM— ECONOMICS 

holding  of  superior  land-forms  out  of  present  use  and  oc- 
cupation necessitates  a  distinction  between  the  normal  eco- 
nomic margin  and  the  artificial  margin  which  usurps  its 
place.  The  artificial  margin  is  the  result  of  juridical  in- 
stitutions, laws  and  customs,  which  sanction  the  holding 
of  superior  land-forms  wholly  or  partially  out  of  use;  the 
normal  margin  is  the  margin  unaffected  by  such  juridical 
institutions,  laws  and  customs.  We  may  distinguish  be- 
tween land-forms  which  are  superior  only  to  the  normal 
margin  from  those  which  are  also  superior  to  an  artificially 
depressed  or  abnormal  margin  by  designating  the  former 
normally  superior,  and  the  latter  abnormally  superior 
land-forms. 

Land  values  appear  under  two  forms ;  annual,  or  rental 
values;  and  ground,  or  selling  values.  A  normally  superior 
land-form  acquires  an  annual  rental  value  because  its  pres- 
ent products  at  current  prices  yield  a  differential  net  value. 
The  producer  collects  this  differential  when  he  sells  his 
products.  If  he  is  the  owner  of  the  land-form  as  well  as 
its  user,  he  retains  this  differential  value,  and  the  fact  that 
he  may  do  so  gives  ground  or  selling  value  to  his  land- 
form.  If  the  producer  is  a  tenant,  he  pays  this  differential 
value  over  to  the  land  owner  as  ground  rent,  and  reserves 
to  himself  at  the  most  only  the  net  labor  and  capital  dif- 
ferentials of  his  product.  The  fact  that  the  owner  can 
collect  an  annual  ground  rent  from  the  tenant  gives  to  his 
land-form  a  gTound  or  selling  value.  The  differential  net 
value  which  distinctively  results  from  the  use  of  a  superior 
land-form  is  reflected  in  ground  value  whether  the  owner 
is  the  actual  land  user  or  not.     In  either  case  ho  acquires 


OF  GROUND  RENT  AND  GROUND  VALUE    159 

this  net  value  as  owner  of  the  land-form  and  not  as  user. 

The  amount  of  ground  rent  in  any  case  where  land- 
forms  are  used  productively  is  determined  by  the  excess  of 
the  net  value  which  may  be  secured  upon  a  given  land- 
form  by  a  given  expenditure  of  labor-power  and  capital- 
forms  over  what  a  like  expenditure  would  produce,  if  ap- 
plied upon  the  economic  margin.  The  tenant  gives  to  his 
landlord  as  ground  rent  substantially  that  part  of  the  dif- 
ferential value  of  his  products  which,  results  from  the  use 
of  a  superior  laud-form,  and  thus  puts  himself  upon  the 
same  level  a?  the  man  who  produces  at  the  margin.  The 
value  which  thus  accrues  to  the  owner  does  not  result  from 
any  expenditure  of  labor-power  or  use  of  capital-forms  by 
such  owner,  and  is  in  excess  of  the  return  which  could  be 
secured  by  the  tenant  by  an  equal  expenditure  of  labor- 
power  and  capital-forms  upon  the  margin. 

The  illustrations  which  we  have  used  all  refer  to  the 
ground  rent  of  land-forms  wbiicli  are  used  for  the  produc- 
tion of  labor-forms  and  the  creation  of  net  value.  Yet  we 
know  that  land-forms  upon  which  nothing  is  produced,  but 
which  are  used  rather  for  the  purposes  of  the  consump- 
tion and  enjoyment  of  labor-forms,  also  yield  ground  rent. 
This  is  a  fact  entirely  overlooked  by  those  who  accept  and 
follow  the  Eicardian  formula  concerning  rent,  as  that  for- 
iimla  is  currently  stated.  An  illustration  showing  that  in 
any  country  where  marginal  land-forms  yield  five  dollars' 
worth  of  wheat  per  acre,  land-forms  yielding  ten  dollars' 
worth  per  acre  will  bear  an  acreage  rental  of  five  dollars  is 
correct  as  far  as  it  goes;  but  it  does  not  explain  why  an 
acre  of  land  will  bear  a  erround  rent  when  u<ed  for  resi- 


IGU  BISOCIAUSM— ECONOMICS 

dence  purposes  only.  In  order  to  explain  this  phenome- 
non we  must  look  not  to  the  producer's  and  seller's,  but  to 
the  buyer's  and  consumer's  side  of  the  market. 

In  our  discussion  of  value  and  cost  we  learned  that 
value,  disvalue,  and  net  value  pertain  to  the  seller,  and 
that  cost,  alternative  cost  and  net  salvage  pertain  to  the 
buyer.  The  seller  seeks  net  value,  and  the  buyer  net  sal- 
vage. The  seller  is  distinctively  a  producer,  and  the  buyer 
as  buyer  is  distinctively  a  consumer. 

In  seeking  net  value  the  seller,  as  producer,  naturally 
seeks  for  those  land-forms  upon  which  most  can  be  pro- 
duced with  the  least  disutility.  This  gives  rise  to  those 
differential  net  values  which  distinctively  accrue  upon  the 
more  productive  land-forms,  as  our  illustrations  have 
shown.  In  like  manner  the  buyer,  as  consumer,  in  seek- 
ing a  salvage  of  cost,  naturally  seeks  for  those  land-forms 
which  are  best  situated  for  the  purchase  at  low  cost,  and 
best  suited  for  the  inexpensive  consumption  of  those  labor- 
forms  which  he  must  buy.  The  importance  of  living  near 
a  market  w'here  one  may  buy  to  advantage  is  just  as  great 
as  living  near  one  where  advantageous  sales  may  be  made. 
Net  salvage  to  the  buyer  is  just  as  truly  reflected  in  ground 
rents  as  is  net  value  to  the  seller.  In  a  city  where  substan- 
tially everything  may  be  bought  at  the  lowest  market  price 
and  in  any  desired  quantity,  residence  lots  are  of  much 
greater  value  than  those  in  a  small  village  where  prices  are 
high  and  goods  scarce.  Ground  rent  may  represent  net 
value,  net  salvage,  or  both.  The  selling  or  ground  values 
of  residence  lots,  like  those  of  productive  land-forms,  are 


OF  GROUND  RENT  AND  GROUND  VALUE    llil 

simply  anticipated  net  values,  or  their  economic  equiva- 
lents in  net  salvage. 

The  owner  of  a  superior  land-form  not  only  annually 
acquires,  in  the  form  of  ground  rent,  the  differential  net 
value  of  all  current  products  which  are  due  to  its  superior- 
ity, but  his  land-form  acquires  a  ground  or  selling  value  by 
virtue  of  the  fact  that  its  future  products  will  yield  differ- 
ential net  values.  This  ground  value,  which  is  expressed 
in  the  selling  price  of  the  land-form,  accrues  to  the  owner 
as  owner  and  not  as  user.  It  accumulates  until  it  equals 
what  is  known  as  so  many  years'  purchase. 

If  the  annual  ground  rent  of  a  given  land-form  is 
$100,  and  the  current  rate  of  interest  on  long  time  and 
secure  investments  is  5  per  cent,  the  selling  price  of  the 
land-form  in  present  conditions  is  substantially  20  years' 
purchase,  or  the  aggregate  sum  of  20  years'  ground  rent. 
Stated  in  another  way,  when  interest  is  5  per  cent,  the 
payment  in  advance  of  a  sum  equal  to  20  years'  ground 
rent  will  purchase  the  propert}'.  This  is  true  because  the 
^Uer  seeks  a  price  which,  if  invested  in  secure  long  time 
commercial  paper  at  the  current  rate  of  interest,  will  pro- 
cure him  an  annual  income  equal  to  the  annual  rental  value 
of  the  land-form  sold ;  while  the  buyer  will  not  pay  a  price 
upon  which  the  annual  ground  rent  will  not  pay  the  cur- 
rent rate  of  interest.  When  current  interest  is  4  per  cent 
a  sum  equal  to  25  years'  ground  rent  upon  a  given  land- 
form,  if  put  at  interest,  will  produce  an  income  equal  to 
the  annual  ground  rent  of  such  land-form.  When  current 
interest  is  5  per  cent  a  sum  equal  to  20  years'  ground 
rent  will  suffice,  the  number  of  years'  ground  rent,  or  num- 


162  BISOCIAUSM— ECONOMICS 

ber  of  years'  purchase,  being  found  by  dividing  100  by  the 
number  expressing  the  current  rate  of  interest.  Where 
land-forms  have  no  strictly  speculative  value,  this  rule  is 
sufficiently  accurate  for  practical  business,  and  is  com- 
monly acted  upon,  especially  in  England ;  but  where  spec- 
ulation in  land-forms  is  in  vogue,  due  allowance  must  be 
made.  The  selling  price  of  land-forms  represents  their 
ground  value. 

Ground  Rent  is  annual  land  value. 

We  are  not  yet  prepared  to  define  ground  value,  but 
quantitatively  considered  it  is  the  present  worth  of  antici- 
pated ground  rent. 

Present  Worth  is  a  phrase  used  in  speaking  of  a  debt 
before  it  is  due,  and  is  the  sum  which,  at  the  prevailing 
rate  of  interest,  will  amount  to  that  debt  when  it  is  due. 
In  a  commercial  sense,  the  selling  price  of  a  land-form  is 
future  ground  rent  capitalized  at  the  current  rate  of 
interest. 

Ground  values  not  only  adhere  to  land-forms  which  are 
actually  used  for  the  purposes  of  consumption  as  well  as 
for  production,  but  also  to  land-forms  of  which  no  present 
use  is  made  at  all.  This  is  strikingly  illustrated  by  the 
cases  of  vacant  lots  and  lands.  In  the  ''South  Side"  busi- 
ness district  in  the  City  of  Chicago  there  were  in  1894 
vacant  lots  to  the  amount  of  ten  acres  and  of  the  aggre- 
gate ground  value  of  $8,000,000.*  This  and  vastly  more 
ground  value  has  accrued  in  that  city  notwithstanding 
the  fact  that  neither  owner  nor  tenant  has  expended  either 


^Eighth  Biennial  Report  Illinois  Bureau  of  Labor  Statistics. 


1 


OF  GROUND  RENT  AND  GROUND  VALUE    163 

labor-power  or  capital-forms  upon  the  lots  themselves. 
After  due  allowance  is  made  for  all  moneys  spent  by  the 
owners  for  improvements  in  the  streets  adjacent  thereto, 
these  lots  have  acquired  a  rental  value  of  many  thou- 
sands of  dollars  per  year  as  bare  land-forms.  The  same 
phenomenon,  upon  a  smaller  scale  as  regards  values,  may 
sometimes  be  seen  in  country  districts.  In  some  places 
farm  lands  have  been  held  out  of  use  until  they  have  be- 
come of  comparatively  great  value. 

Ground  rent  is  shown  by  the  foregoing  illustrations  to 
adhere  to  land-forms  as  a  result  of  the  distinctive  net 
values  and  net  salvages  actually  or  potentially  produced 
or  consumed  thereon.  These  net  values  and  salvages 
are  primarily  involved  in  the  prices  of  products,  but 
are  there  indistinguishable  and  unmeasurable.  In  the  end, 
however,  they  all  appear  as  land  values,  and  accrue  solely 
to  the  owners  of  the  superior  land-forms  as  land  owners 
and  not  as  land  users.  Land  values  absorb  all  differential 
values  M'hich  result  from  the  use  of  superior  land-forms. 
Such  differential  values  can  be  distinctively  recognized  and 
measured  only  when  reflected  in  the  value  of  the  superior 
land-forms  themselves. 

The  importance  of  thoroughly  understanding  the  full 
import  of  the  marginal  return,  differential  value,  ground 
rent  and  ground  value,  as  we  have  defined  these  terms, 
is  so  great  that  we  will  pass  in  review  their  distinctive 
features.  This  will  carry  us  back  to  a  fundamental  fact 
of  Economics,  viz.,  that  all  production  is  the  result  of  the 
application  of  labor-power  to  land-forms.  Labor-power 
may  be  assisted  to  great  advantage  by  auxiliary  capital- 


164  BISOCIALISM— ECONOMICS 

forms  in  overcoming  the  resistance  of  matter,  and  pure 
capital-forms  may  be  used  to  overcome  the  irksomenese 
of  waiting.  But  capital-forms  are  themselves  the  results 
of  labor-power  expended  upon  land-forms;  as  between 
the  two,  labor-power  is  the  creator,  the  capital-form  is  the 
creature.  In  the  process  of  production  labor-power  is 
usually  the  principal,  capital-form  usually  the  assistant. 
It  is  only  when  the  disutility  of  time  is  to  be  overcome 
that  capital-forms  have  a  distinctive  function  and  col- 
lectively rise  to  the  dignity  of  a  coordinate  factor  in  pro- 
duction. The  efficiency  of  labor-power,  whether  aided  by 
capital-forms  or  not,  is  governed  by  the  utility  of  the  land- 
form  upon  which  it  is  expended. 

Every  market  has  tributary  to  it  a  certain  number  of 
land-forms  which  must  necessarily  be  used  in  order  to 
supply  the  demands  of  such  market.  Of  these  necessary 
land-forms  some  are  least  productive  of  all.  The  men  who 
occupy  these  least  productive  land-forms  receive  a  given 
return  for  the  disutility  which  they  undergo.  Men  who 
occupy  land-forms  of  greater  utility  receive  a  greater  re- 
turn for  a  like  disutility.  If  we  undertake  to  compare  the 
differences  of  return  for  like  disutilities  throughout  the 
territory  of  the  market,  we  can  only  do  so  by  taking  the 
■upper  limit  of  the  marginal  return  as  the  point  from  which 
to  measure,  and  the  marginal  return  itself  as  the  basis,  but 
not  the  unit  of  comparison.  The  unit  we  shall  develop 
later. 

Ground  rent,  like  that  differential  net  value  which  it  re- 
flects, begins  at  the  upper  limit  of  the  marginal  return.  It 
extends  upward  in  varying  degrees  and  manifests  itself  in 


OP  GROUND  RENT  AND  GROUND  VALUE    1G5 

the  annual  value  of  the  particular  land-form  to  which  it 
attaches.  This  annual  value  is  determined  by  the  excess 
of  the  net  value  which  may  be  acquired  on  the  land-form 
in  question  over  that  which  may,  with  like  disutility,  be 
acquired  upon  the  economic  margin.  The  landlord  will 
receive  no  less  as  annual  rent  because  of  the  one-sided 
competition  always  existing  between  land  user  and  land 
owner  in  present  conditions.  The  tenant  will  give  no  more 
because  he  can  occupy  the  margin  rent  free.  It  must  be 
remembered  that  in  this  market  the  competition  is  not  for 
land-forms  merely,  for  of  these,  such  as  they  are,  there  is 
an  abundance  for  all.  The  competition  is  for  land-forms 
which  are  tributary  to  some  general  market.  Of  these 
the  supply  is  always  limited  and  the  demand  ever  increas- 
ing. In  the  competition  for  land-forms,  however,  tenants 
will  give  no  more  than  the  excess  of  net  value  over  the 
marginal  return;  that  is,  no  more  than  the  land  differ- 
ential, because  they  can  occupy  the  economic  margin  and 
jicquire  the  marginal  return  without  the  payment  of  rent. 
The  fact  that  ground  rent  is  but  a  reflection  of  differ- 
ential net  values  of  product  has  an  important  bearing  upon 
a  much  mooted  and  generally  misunderstood  question  of 
Economics.  This  is  the  question  of  the  relation  of  ground 
rent  to  the  prices  of  labor-forms  produced  or  consumed 
upon  the  particular  land-forms  upon  which  the  ground 
rent  accrues.  It  is  sometimes  said  that  "ground  rent  does 
not  enter  into  price,"  or  that  "ground  rent  is  not  an  ele- 
ment of  price."  From  these  statements  it  is  easy  to  glide 
into  the  totally  unrelated  and  erroneous  statement  that 


166  BISOCIALISM— ECONOMICS 

"ground  rent  is  not  paid  out  of  price/'  price  in  each  case 
referring  to  market  price  of  products. 

The  real  solution  of  the  matter  is  this :  The  prices  of 
all  labor-forms  are  fixed  by  the  marginal  pair  and,  in  ordi- 
nary' circumstances,  are  the  same  for  all  producers.  In  or- 
dinary circumstances,  also,  the  marginal  seller  receives 
some  net  value — he  receives  the  marginal  return.  The  oc- 
cupiers of  superior  land-forms  receive  the  same  price,  but 
because  the  superiority  of  their  land-forms  enables  them 
to  produce  with  less  disutility,  their  net  values  are  greater 
than  the  marginal  return  by  the  amount  of  the  land  dif- 
ferential. This  differential  value  is  reflected  in  ground 
rents.  The  price  of  the  products  existed  before  the  ground 
rent  accrued,  and  instead  of  ground  rent  affecting  price,  it 
is  affected  by  price.  The  higher  the  price  of  products 
the  more  rent;  the  lower  this  price  the  less  rent.  Ground 
rent  does  not  enter  into  price,  but  price  does  enter  into 
ground  rent  and  affects  it  at  its  upper  limit. 

A  farmer  who  pays  high  ground  rent  gets  no  more 
for  his  grain  on  that  account.  But  if  prices  of  grain  are 
high,  he  will  pay  more  rent.  And  as  every  one  knows  from 
experience,  the  prices  of  goods  are  not  higher  in  the  "down 
town"  districts  of  a  great  city  where  ground  rents  are 
enormous,  but  on  the  other  hand,  are  lower  than  in  the 
outlying  districts  where  rents  are  comparatively  low. 
From  these  facts  it  will  be  seen  that  the  first  two  state- 
ments above  quoted  are  true,  but  are  liable  to  be  misunder- 
stood, while  the  third  is  palpably  untrue.  The  only 
means  which  the  ordinary  farmer  has  of  paying  ground 
rent  is  out  of  the  price  of  his  products;  while  the  businc."- 


OF  GROUND  RENT  AND  GROUND  VALUE    107 

man,  in  order  to  succeed,  must  make  his  prices  cover  all 
expenses,  including  ground  rent.  The  merchant,  however, 
does  not  raise  his  prices  because  his  ground  rent  is  high, 
but  pays  high  ground  rent  because  his  net  values  at  cur- 
rent prices  are  great.  Ground  rent,  from  the  point  of 
view  of  market  price  of  products,  is  a  result  and  not  a 
cause. 

We  have  already  noted  the  fact  that  the  owner  of  a 
land-form  not  only  receives  the  current  differential  net 
value  which  is  reflected  in  ground  rents,  but  discounts  fu- 
ture differential  values  in  the  selling  price  or  ground  value 
of  his  land-form.  If  he  rents  to  another,  he  is  paid  a 
current  differential  value  annually  by  his  tenant,  and  if  he 
sells,  he  is  paid  the  present  worth  of  anticipated  future 
differential  values  by  the  buyer  of  his  land-form. 

Although  all  land  differentials  originally  inure  to  the 
owners  of  the  land-forms  in  any  community,  a  part  of 
these  values  are  annually  taken  by  the  State  in  taxation. 
All  taxes  levied  wholly  upon  land  values,  irrespective  of 
the  values  of  improvements,  fall  upon  the  owner  of  the 
land-form  as  owner,  and  are  paid  out  of  current  ground 
rents.  It  is  impossible  that  the  tax  upon  the  value  of  a 
given  land-form  could  equal  the  entire  ground  rent  evfry 
year.  For  if  it  did,  it  would  require  all  the  differential 
value  of  product  to  pay  the  tax,  and  the  owner  would  be 
no  better  off  than  if  he  occupied  or  owned  a  land-form 
upon  the  economic  margin.  Hence  his  land-form  would 
have  no  selling  value  whatever,  and  without  a  selling  or 
market  value  there  could  be  no  basis  for  taxation.  By  reg- 
ularly taking  all  the  ground  rout  in  taxation  (if  this  were 


168  BISOCIALISM— ECONOMICS 

possible)  the  State  would  destroy  all  ground  value;  for 
ground  value  is  simply  future  rental  value  anticipated  by 
the  owner.  In  order  for  land-forms  to  have  any  selling 
or  ground  values  some  part  of  the  ground  rent  must  sys- 
tematically be  left  to  the  owner  after  payment  of  taxes; 
this  amount  left  to  the  owner  may  not  be  less  than  a  sum 
equal  to  the  true  discount  of  the  annual  ground  rent  at 
the  current  rate  of  interest. 

Suppose  the  annual  ground  rent  of  a  given  land-form  to 
be  $105,  the  current  rate  of  interest  5  per  cent,  and  that 
the  annual  tax  imposed  by  law  is  regularly  to  be  100  per 
cent  of  the  selling  price  or  ground  value  of  all  land-forms. 
A  purchaser  will  invest  $100  in  the  given  land-form,  and 
its  owner  can  secure  no  more.  The  ground  value  is  then 
less  than  the  annual  ground  rent ;  the  former  is  the  present 
worth  of  the  latter.  The  purchaser  by  paying  $100  for  the 
land-form  can  annually  thereafter  collect  $105  from  the 
tenant,  turn  $100  over  to  the  State  as  taxes,  and  retain 
$5  net  ground  rent.  This  is  equivalent  to  interest  at  5 
per  cent  upon  $100,  the  amount  of  the  investment;  and 
ordinarily  he  can  turn  this  investment  into  cash  at  any 
time  by  a  sale  of  the  land-form  for  the  same  price  he  paid. 

From  this  illustration  we  see  that  while  the  State  can- 
not take  100  per  cent  of  the  rental  value — ground  rent — 
of  a  land-form,  it  can  take  100  per  cent  of  its  selling  or 
ground  value  every  year.  And  we  also  see  that  if  taxes 
upon  land  values,  irrespective  of  improvements,  were  in- 
creased from  present  rates  to  100  per  cent  of  ground  value, 
the  selling  price  of  land-forms  would  fall  from  the  antici- 
pated aggregate  of  about  20  years'  ground  rent  to  the 


OF  GROUND  RENT  AND  GROUND  VALUE    169 

present  worth  of  one  year's  ground  rent,  if  the  current 
rate  of  interest  is  5  per  cent  per  annum. 

The  foregoing  illustration  shows  what  would  be  the  re- 
lation between  ground  values  and  ground  rents,  if  all 
the  former  were  annually  appropriated  to  public  uses.  An 
illustration  already  used  in  this  chapter  shows  the  rela- 
tion between  ground  values  and  ground  rents  in  present 
conditions.  Each  shows  that  while  ground  rent  has  an 
origin  entirely  distinct  from  that  of  economic  interest  and 
is  independent  of  it,  ground  value  is  directly  governed  in 
all  cases  by  the  current  rate  of  interest.  The  ground  rent 
of  a  given  land-form  might  remain  the  same,  if  a  change 
were  made  from  present  conditions  to  a  condition  of  the 
full  socialization  of  ground  values,  and  the  current  rate 
of  interest  might  also  remain  the  same.  But  assuming  the 
ground  rent  to  be  $105,  and  the  current  rate  of  interest  to 
be  5  per  cent,  the  ground  value  of  such  a  land-form  would 
decrease  from  about  $2,100  to  about  $100.  In  each  case 
the  ground  value  represents  a  sum  of  money  which,  put 
at  interest  at  the  current  rate,  yields  the  economic 
equivalent  of  the  net  ground  rent. 

A  man  having  a  certain  sum  of  money  for  investment, 
either  in  present  conditions  or  in  conditions  attending  the 
complete  socialization  of  ground  values  (land  tenure  oth- 
erwise remaining  substantially  the  same),  has  a  choice  of 
putting  it  at  interest  or  investing  it  in  land-forms.  In 
case  the  latter  investment  is  chosen  he  collects  all  the 
ground  rent,  and  whether  he  keeps  it  substantially  all,  as  in 
present  conditions,  or  turns  substantially  95  per  cent  of  it 
over  to  the  State  in  payment  of  taxes,  he  receives  the  cur- 


170  BISOCIALISM— ECONOMICS 

rent  rate  of  interest  on  his  investment  and,  as  a  rule,  noth- 
ing more.  If  investments  in  land-forms  yield  more  than 
the  return  to  capital-forms  at  the  current  rate  of  interest, 
money  is  withdrawn  from  other  forms  of  investment  until 
the  equilibrium  of  current  returns  is  restored,  and  vice 
versa. 

From  these  illustrations  it  appears  that  in  so  far  as 
ground  rent  is  equivalent  only  to  the  current  return  of 
money  put  at  interest  it  is  not,  strictly  speaking,  a  dif- 
ferential value.  Above  this  return  it  is  distinctively  a  dif- 
ferential value  and  manifests  itself  in  the  form  of  ground 
value  whether  it  is  absorbed  by  the  State  or  is  allowed  to 
accumulate  to  a  given  number  of  years'  purchase  in  pri- 
vate hands.  We  are  now  prepared  to  define  ground  value, 
not  quantitatively  but  qualitatively. 

Ground  Value  is  differential  ground  rent,  capitalized  at 
the  current  rate  of  interest. 

The  absorption  of  all  ground  rent  into  the  public  treas- 
ury by  means  of  taxation  simply  involves  the  socialization 
of  all  differential  ground  rents. 

The  fact  that  ground  rent  is  capitalized  in  form  does 
not  convert  it  into  capital.  It  simply  gives  it  one  of  the 
characteristics  of  capital  in  its  outward  appearance;  funda- 
mentally they  are  as  distinct  as  before. 


CHAPTER  XIV. 

OF    LAND   TENURE. 

The  expropriation  of  the  mass  of  the  people  from  the  soil 
forms  the  basis  of  the  capitalist  mode  of  production. 

Karl  Marx. 

A  long  habit  of  not  thinking  a  thing  wrong  gives  it  a 
superficial  appearance  of  being  right,  and  raises  at  first  a 
formidable  outcry  in  defence  of  custom.         Thomas  Paine. 

We  have  already  noted  the  close  relationship  between 
labor-forms  and  capital-forms,  and  consequently,  between 
labor  values  and  capital  values.  Except  in  so  far  as  they 
are  used  to  overcome  the  disutility  of  time,  capital-forms 
simply  represent  the  stored  up  utility  of  labor-power;  and 
even  pure  capital-forms  owe  their  very  existence  to  the 
exertion  of  labor-power.  Labor-forms  and  capital-forms 
have  a  common  origin.  To  labor-power  auxiliary  capital- 
forms  serve  as  supplements,  and  pure  capital-forms  as 
complements.  In  normal  conditions  labor  values  and 
capital  values  are  always  closely  related,  are  never  antag- 
onistic, and  tend  to  rise  and  fall  together.  Increase  of 
population  and  what  we  call  material  progress,  in  normal 
conditions,  both  tend  to  lower  all  labor  values  and  all 
capital  values  within  a  given  territory. 

On  the  other  hand,  land-forms  exisi:  iiidependentl>^  of 
the  exertion  of  labor-power  or  the  existences  oi  capn»^ 
forms.  Their  origm  is  in  nature  alone.  No  man,  either 
by  taking  thought  or  taking  action,  can  originally  create 

171 


172  BISOCIALISM— ECONOMICS 

the  smallest  land-form.  In  normal  conditions  land  values 
tend  to  increase  as  labor  values  and  capital  values  tend  to 
fall. 

With  increase  of  population  and  material  progress  in  a 
given  territory  the  demand  for  superior  land-forms  in- 
creases, while  the  supply  is  limited  by  nature;  conse- 
quently the  values  of  superior  land-forms  in  such  territory 
tend  to  rise,  while  labor  values  and  capital  values  tend  to 
fall. 

We  now  come  to  a  further  point  of  differentiation  be- 
tween labor  values  and  capital  values  upon  the  one  hand, 
and  land  values  upon  the  other. 

Every  exchange  in  the  market  presupposes  a  right  .of 
exclusive  possession  to  the  thing  sold,  which  right  is  trans- 
ferred from  the  seller  to  the  buyer  and  forms  the  gist  of 
the  transaction.  Neither  the  laws  of  the  market  nor  the 
laws  of  the  State  recognize  as  valid  a  sale  of  property  or 
of  an  interest  therein  to  which  the  seller  has  not  the  right 
of  possession  as  against  the  world  to  the  extent  of  the 
property  or  interest  transferred.  It  is  commonly  recog- 
nized among  all  commercial  peoples  that  the  right  of  ex- 
clusive possession  to  all  labor-forms  and  capital-forms  is 
based  upon  their  production.  It  is  assumed  in  all  cases 
that  the  rightful  possessor  of  such  property  either  pro- 
duced the  same  or  derived  his  title,  directly  or  indirectly, 
through  or  from  some  one  who  did. 

With  land-forms  this  is  not  true.  Not  having  been  pro- 
duced by  man,  no  title  can  be  based  upon  the  ground  of 
production.  In  the  absence  of  organized  government  the 
original  exclusive  possession  of  particular  land-forms  can 


J 


OF  LAND  TENURE  173 

only  be  obtained  and  maintained  by  individual  force.  It 
can  not  originally  be  acquired  by  purchase,  because  no  one 
has  a  recognized  right  to  sell.  When  organized  govern- 
ment appears,  however  primitive  its  form,  it  at  once  as- 
sumes a  sovereignty  over  all  land-forms  within  its  juris- 
diction, and  thereafter  all  land-forms  are  "held  from  the 
crown,"  and  some  form  of  land  holding  is  established  and 
maintained  by  law.  The  right  to  the  exclusive  possession 
of  particular  land-forms  in  any  country  having  an  estab- 
lished government  depends  upon  the  collective  power  of 
the  State  in  the  enforcement  of  a  juridical  or  legal  sanction 
known  as  land  tenure. 

land  Tenure  is  the  juridical  or  legal  sanction  by  which 
particular  land-forms  are  held,  used,  or  controlled. 

Four  facts  of  economic  importance  grow  out  of  the 
facts  hitherto  discussed  in  this  chapter.  The  first  is  that 
organized  government — the  State — bears  a  relation  to 
land-forms,  and  consequently  to  land  values,  different 
from  its  relation  to  labor-forms  and  capital-forms,  and 
consequently  to  labor  values  and  capital  values.  To  the 
title  of  labor-forms  and  capital-forms  its  relation  is  sim- 
ply that  of  protector;  toward  them  it  exercises  what  is 
known  in  law  as  its  police  power ;  while  of  the  title  to  land- 
forms  it  is  the  creator  as  well  as  protector.  The  State 
determines  what  land-forms'  shall  be  devoted  to  private, 
and  what  to  public  uses,  and  all  private  titles  relate  back 
to  the  government. 

Under  an  orderly  government  the  matter  of  the  exclu- 
sive possession  of  particular  land-forms  can  not  be  left 
to  individual  strife;  nor  can  it  be  settled  by  the  compe- 


174  BISOCIALISM— ECONOMICS 

tition  of  the  market  alone,  for  originally  no  man  can  eonie 
into  the  market  with  any  better  right  to  convey  than  that 
possessed  by  every  other  man  therein.  In  this  condition 
the  State  intervenes,  assumes  title  to  all  land-forms,  and 
parcels  them  out  under  such  system  of  land  tenure  as  it 
sees  fit  to  adopt.  In  doing  so  it  assumes,  directly  or  indi- 
rectly, to  represent  the  interests  of  all  its  citizens  in  and 
to  the  land-forms  within  its  borders,  and  by  giving  title 
to  one  man,  to  cut  off  the  rights  of  all  other  men  to  the 
particular  land-form  conveyed.  No  State  has  ever  as- 
sumed the  right  or  the  power  to  act  in  this  manner  toward 
labor-forms  or  capital-forms;  for  although  the  products 
of  labor-power  may  be  arbitrarily  diverted  by  law  from 
the  actual  producer  to  another,  either  wholly,  as  in  slav- 
ery, or  in  part,  through  the  various  forms  of  monopoly, 
yet  the  law  in  such  cases  looks  upon  the  beneficiary  as  the 
producer,  and  the  title  to  the  property  does  not  at  any  time 
vest  in  the  State  or  issue  directly  therefrom.  The  impor- 
tance of  this  distinction  will  more  fully  appear  when  we 
discuss  the  matter  of  the  socialization  of  values. 

The  second  fact  to  which  we  have  referred  is  this :  All 
general  benefits  derived  from  good  government  tend  to 
raise  the  values  of  superior  land-forms — including  fran- 
chise values  based  upon  land  grants — and  to  lower  all 
other  values.  In  any  country  where  property  rights  are 
well  protected,  where  personal  safety  is  assured,  and  where 
government  is  economically  administered,  production  is 
encouraged,  markets  are  well  supplied,  and  current  prices 
fall.  In  this  way  every  man,  through  the  interchange  of 
the  market,  may  supply  his  individual  needs  with  the  least 


J 


OF  LAND  TENURE  175 

exertion.  But  if  property  and  persons  are  insecure,  if 
lawlessness  prevails,  and  an  extravagant  government 
wastes  its  revenues,  production  is  discouraged,  markets  are 
depleted,  and  current  prices  rise.  On  the  other  hand, 
when  production  is  encouraged  by  good  government,  com- 
petition for  land-forms  is  increased  and  land  values  rise; 
and  when  production  is  discouraged  by  bad  government  the 
competition  for  land-forms  decreases  and  land  values  fall. 

Let  us  suppose  the  case  of  two  cities  equally  well  located 
as  to  natural  advantages  and  as  to  communication  with 
the  outside  world.  Up  to  a  given  time  both  have  been 
equally  prosperous.  Suppose  now  that  the  one  increases 
the  efficiency  of  its  police  department,  establishes  supe- 
rior fire  protection,  develops  its  public  school  system,  and 
so  attracts  to  itself  an  increase  of  population  of  a  thrifty 
and  temperate  character  who  build  stores,  factories  and 
churches,  and  beautify  their  premises.  The  stores  will  be 
filled  with  merchandise,  merchants  will  compete  with  one 
another  for  the  making  of  sales,  and  low  prices  will  result. 
But  the  merchants  will  also  compete  for  the  most  advan- 
tageous locations,  and  the  new  comers  will  compete  with 
one  another  and  with  the  older  residents  for  sites  for 
homes,  stores  and  factories.  The  price  of  land-forms  will 
increase  from  year  to  year  and  upon  the  most  valuable 
comer  in  the  city  a  department  store  will  lower  the  prices 
of  all  staple  articles. 

Suppose  that  in  the  other  city  the  police  department 
becomes  demoralized,  the  fire  protection  inadequate  and 
uncertain,  and  the  public  school  system  inefficient.  In 
such  circumstances  the  grpwth  of  the  city  will  be  checked, 


176  BISOCIALISM— ECONOMICS 

merchants  will  carry  small  stocks  of  goods  at  increased 
risks,  prices  will  be  high  at  the  stores,  and  land-forms  will 
decrease  in  value.  All  of  the  advantages  of  good  gov- 
ernment in  any  country  are  reflected  in  increased  land 
values. 

The  third  fact  to  which  we  have  alluded  is  this:  All 
natural  advantages  of  climate,  soil,  scenery,  water  ways, 
forests,  mines,  coal  beds,  petroleum  and  gas  deposits,  etc., 
are  reflected  in  land  values.  Examples  illustrating  this 
fact  might  be  cited  almost  indefinitely,  but  one  will  suf- 
fice. Suppose  that  in  a  large  city,  upon  land  belonging  to 
the  municipality,  the  public  authorities  happen  to  strike  a 
deposit  of  natural  gas  sufficient  to  supply  the  entire  city 
for  fuel  and  lighting  purposes.  Suppose  further  that  the 
city  pipes  this  gas  through  all  of  its  streets  and  furnishes 
it  to  consumers  at  an  actual  cost  of  twenty-five  cents, 
whereas  the  citizens  have  been  paying  one  dollar  and 
twenty-five  cents  per  thousand  feet  to  a  private  company 
for  artificial  gas.  What  will  be  the  effect  ?  Eents  will  im- 
mediately rise  and  absorb  this  advantage  upon  all  tene- 
ment property  and  the  selling  values  of  all  land-forms  will 
rise  accordingly.  Land  users,  as  users,  will  be  financially 
little  or  no  better  off  than  before,  while  land  owners,  as 
owners,  whether  they  are  the  real  occupiers  of  their  respec- 
tive land-forms  or  not,  will  reap  substantially  all  the  finan- 
cial benefits,  either  in  increased  ground  rents  or  in  greater 
ground  values,  or  both. 

The  fourth  fact  in  question  is  that  all  improvements  in 
the  matter  of  highways  and  other  transportation  facilities 
increase   the  value   of  all   adjacent  and  tributary  land- 


OF  LAND  TENURE  177 

forms.  This  is  a  fact  which  may  easily  be  verified  by 
any  one  who  will  look  around  him.  A  railroad  can  not  be 
built  through  any  territory  having  present  need  of  it  with- 
out increasing  the  ground  values  of  the  adjacent  and  tribu- 
tary land-forms  more  than  the  economic  equivalent  of  the 
actual  cost  of  the  road.  After  the  road  is  in  operation  the 
increase  in  ground  rents  of  adjacent  and  tributary  land- 
forms  will  more  than  equal  the  annual  cost  of  operation. 
The  same  is  true  of  a  street  railway  in  any  city.  The  bet- 
ter the  needed  transportation  in  any  community  the  higher 
the  land  values  in  the  form  of  both  ground  rents  and 
ground  values.  The  gain  to  the  sellers  of  all  labor-forms 
produced  locally  is  absorbed  in  increased  rental  and 
ground  values,  while  all  labor-forms  brought  to  market 
from  the  outside  bear  a  lower  price  because  of  cheaper 
transportation  charges.  All  labor  values  tend  to  fall 
within  the  territory  affected  by  the  improved  transporta- 
tion service.  The  fact  that  labor-forms  can  be  cheaply 
purchased  in  any  given  market  is  reflected  in  local  land 
values,  especially  in  the  values  of  city  and  village  lots 
for  residence  purposes,  as  was  shown  in  the  preceding 
chapter. 

Instances  of  the  marked  effect  of  railroad  building  upon 
land  values  have  been  exemplified  in  almost  every  com- 
munity in  the  United  States.  In  former  years  it  was  quite 
the  custom  for  the  people  of  a  community  to  vote  an  issue 
of  bonds  sufficient  to  build  and  equip,  at  actual  cost,  a 
proposed  railroad  through  such  community.  Inasmuch  as 
these  people  were  to  pay  the  regular  rates  for  freight  and 
passenger  service  upon  the  completion  of  the  road,  they 


178  BISOCIALISM— ECONOMICS 

could  only  hope  to  recoup  themselves  for  the  increased 
taxes  necessary  to  pay  the  bonds  by  an  increase  in  the 
values  of  their  labor-forms  which,  in  turn,  would  be  re- 
flected in  the  increased  values  of  their  land-forms.  The 
mere  announcement  that  a  railroad  is  to  be  constructed 
tiirough  a  given  territory  causes  a  speculative  increase  in 
land  values  throughout  such  territory.  So  great  has  been 
the  inflation  of  land  values  because  of  the  construction  or 
proposed  construction  of  railroads  that  roads  have  been 
built  for  which  there  was  no  present  need,  and  through 
territory  which  could  not  possibly  supply  traffic  to  pay 
current  expenses.  In  other  cases  bonds  have  been  voted 
and  even  issued  in  payment  of  bonuses  for  the  construction 
of  railroads  which  never  existed,  nor  were  intended  to 
exist,  except  upon  paper. 

It  must  be  perceived  and  kept  in  mind  that  when  in- 
creased labor-power  is  exerted,  or  when  more  capital-forms 
are  expended  upon  a  superior  land-form,  the  effect  is  not 
all  manifested  in  the  increase  of  labor,  or  capital  differen- 
tials, as  the  case  may  be.  A  part  of  the  increase  in  net 
value  is  always  absorbed  by  land  values.  Although  the 
additional  labor-power  or  capital-forms  may  increase  the 
total  net  value  upon  the  superior  land-form  50  per  cent, 
yet  if  the  same  increase  applied  upon  the  economic  margin 
would  result  in  an  increase  in  net  value  of  only  10  per 
cent,  then  10  per  cent  is  all  that  will  go  to  the  producer 
as  producer  upon  the  superior  land-form.  The  other  40  per 
cent  will  manifest  itself  as  land  value,  and  will  go  to  the 
owner  of  the  land  as  land  o^vner,  whether  he  be  the  land 
user  or  not.    If  the  relation  of  landlord  and  tenant  exists. 


OF  LAND  TENURE  179 

this  division  of  the  increase  will  immediately  appear  in  an 
increase  of  ground  rent  as  well  as  ground  value.  If  the 
owner  occupies  the  superior  land-form  himself,  the  result 
will  be  manifested  only  in  the  increased  ground  value  of  his 
land-form.  If  a  tenant  be  the  user  of  the  land-form  under 
a  long  time  lease  at  a  fixed  rent,  the  effect  will  seemingly 
be  modified,  but  in  reality  such  a  tenant  is  owner  to  the 
extent  of  his  term.  He  can  sell  his  leasehold  interest  at  a 
premium  or  sublet  at  a  profit.  In  case  of  a  tenancy  from 
year  to  year,  the  tenant  may  acquire  and  retain  approxi- 
mately the  entire  increase  for  the  current  year,  because 
of  the  terms  of  his  lease  already  made ;  but  taken  one  year 
with  another,  an  increase  in  ground  rent  will  absorb  sub- 
stantially all  the  increase  acquired  over  what  a  like  exer- 
tion or  expenditure  would  produce  at  the  margin. 

Another  peculiarity  of  land  value  is  that  in  any  given 
case  it  is  wholly  independent  of  the  labor-power  of  any  par- 
ticular person,  be  he  owner  or  otherwise.  Indeed,  it  is 
practically  independent  of  the  existence  of  any  particular 
person.  A  vacant  land-form  in  a  great  city  in  present 
conditions  may  be  owned  by  a  man  who  never  saw  it, 
never  performed  a  stroke  of  productive  labor  in  his  life, 
and  who  lives  on  the  other  side  of  the  globe.  The  owner 
may  die  and  his  heirs  be  unknown,  but  the  land  value  is 
not  thereby  affected.  The  land-form  may  lie  idle  for  an- 
other fifty  years,  and  at  the  end  of  that  time  have  double 
its  present  value.  The  growth  of  the  city,  the  presence  and 
labor  of  every  man,  woman  and  child  within  its  limits,  ha^^ 
contributed  to  this  value,  while  the  act  of  its  owner,  known 
or  unknown,  in  leaving  it  idle  has  been  a  detriment  to 


180  BISOCIAUSM— ECONOMICS 

surrounding  property  and,  perhaps,  even  to  the  city  itself. 

It  is  not  so  with  labor-forms.  Some  man,  or  some  par- 
ticular men,  must  originally  exert  labor-power  in  order 
that  labor- forms  may  exist,  and  when  produced  they  require 
constant  use,  care  or  supervision  to  maintain  their  value  at 
all.  The  larger  the  community,  the  larger  the  relative  sup- 
ply of  such  labor-forms  is  likely  to  be,  and  the  more  likely 
they  are  to  decrease  in  value  aside  from  natural  deteriora- 
tion. 

Again,  land-forms  which  are  held  out  of  use  in  a  pro- 
gressive community  not  only  increase  in  value  themselves, 
but  the  fact  that  they  are  unused  adds  to  the  value  of  all 
still  superior  land-forms.  Suppose  that  in  any  given  com- 
munity there  are  certain  land-forms  which  are  capable  of 
yielding,  with  given  disutility  of  cultivation,  $10  per  acre; 
certain  others,  $8,  $6,  $4  and  $2,  respectively.  Suppose, 
further,  that  at  any  given  time  all  the  $10,  $8,  and  $6  land- 
forms  are  occupied  under  present  private  tenure,  the  $6 
forms  being  upon  the  normal  economic  margin.  Then  the 
$10  land-forms  will  yield  a  differential  value  of  product  of 
$4,  and  the  $8  forms  of  $2  per  acre. 

If,  now,  the  growth  of  population  requires  the  occu- 
pancy and  use  of  $4  land-forms,  the  economic  margin  falls 
to  these ;  the  $6  forms  yield  a  differential  value  of  $2 ;  and 
the  differential  values  of  the  higher  forms  are  increased 
to  $6  and  $4,  respectively.  Let  us  assimie,  however,  that 
under  the  existing  land  tenure  the  $4  land-forms  have 
been  bought  up  for  speculative  purposes,  and  are  held  out 
of  use  for  a  rise  in  the  land  market.  Then  production 
must  descend  at  once  to  the  $2  land-forms,  and  the  dif- 


OF  LAND  TENURE  181 

ferential  values  of  the  superior  land-forms  rise  $2  per 
acre  more  than  if  the  $4  land-forms  were  open  to  use. 
ITius  an  abnormal  condition  of  land  tenure  has  increased 
the  land  differentials  of  tlie  best  land-forms  by  the  arbi- 
trary act  of  the  owner  of  the  $4  land-forms  in  holding 
these  out  of  use.  This  is  the  inevitable  result  of  the  hold- 
ing out  of  use  of  land-forms  above  the  economic  margin. 
The  values  of  all  still  superior  land-forms  become  not 
merely  differential,  but,  to  a  greater  or  less  degree,  mo- 
nopoly values. 

The  effect  of  the  increase  of  land  values  through  the 
lowering  of  the  economic  margin  from  any  cause  is  more 
far  reaching  than  might  at  first  sight  appear.  It  must  be 
remembered  that  land  values  go  to  the  land  owner  as 
owner,  and  not  as  land  user,  or  producer.  This  leaves  to 
the  actual  producer  upon  a  given  land-form,  at  the  most, 
only  the  net  labor  values  and  capital  values  available 
thereon.  If  the  producer  is  a  tenant  and  exerts  only  com- 
mon labor-power,  he  receives  but  the  equivalent  of  the 
marginal  return;  for  the  only  differential  value  is  that 
arising  from  the  superiority  of  the  land-form,  and  that  is 
taken  from  him  in  the  form  of  ground  reni  If  now  the 
tenant,  through  the  acquirement  of  special  skill  or  the 
use  of  capital-forms,  or  both,  increases  the  value  of  his 
product  10  per  cent,  there  arises  a  new  differential  value. 
The  tenant,  however,  does  not  retain  all  of  this  increase 
one  year  with  another.  The  land  owner,  at  the  time  of 
their  next  bargaining,  increases  the  ground  rent  so  as  to  ab- 
sorb all  of  the  increase  for  the  next  year,  except  what  a  like 
additional  expenditure  of  labor  and  capital  will  produce, 


182  BISOCIALISM— ECONOMIC:^^ 

i  r  applied  upon  the  economic  margin.  If  2  per  cent  is  all 
the  increase  that  will  accrue  upooi  the  margin,  that  is  all 
that  the  tenant  can  retain.  Nor  is  this  all.  From  pressure 
of  population,  the  withholding  of  land-forms  from  use,  or 
for  some  other  reason,  the  marginal  producer  may  be  com- 
pelled to  occupy  a  land-form  which  is  10  per  cent  less 
productive  than  the  margin  formerly  occupied.  In  such 
case  the  land-form  which  was  formerly  upon  the  margin 
now  bears  a  rent,  and  the  rent  of  all  superior  land-forms, 
including  that  occupied  by  the  tenant  in  question,  is  in- 
creased 10  per  cent.  The  tenant  is,  therefore,  no  better 
off  than  before.  What  he  gains  in  labor  and  capital  differ- 
entials he  loses  in  the  payment  of  increased  ground  rent. 
Again,  a  man  may  be  so  circumstanced  at  a  given  time 
that  he  acquires  a  certain  net  return  after  the  payment 
of  ground  rent.  Within  a  certain  space  of  time  thereafter, 
say  five  years,  he  acquires  additional  skill  and  uses  addi- 
tional capital-forms  so  that  his  increased  labor  and  capital 
differentials  net  him  5  per  cent  of  his  former  return.  But 
it  may  be  that  in  these  five  years  the  economic  margin  has 
been  artificially  depressed  so  that  his  ground  rent  has  in- 
creased 10  per  cent  of  his  former  net  return,  whereas  his 
net  labor  and  capital  differentials  together  have  increased 
but  5  per  cent  of  such  return.  In  such  case,  notwithstand- 
ing the  man's  diligence,  his  last  state  is  worse  than  the  first ; 
the  increase  in  ground  rent  has  absorbed  twice  as  much 
net  value  as  his  additional  skill  and  capital-forms  have 
realized.  While  it  is  true  that  he  is  still  better  off  than 
if  he  had  not  acquired  skill  and  accumulated  the  capital- 
forms,  it  is  also  true  that,  if  the  economic  margin  had  not 


OP  LAND  TENURE  183 

been  depressed,  he  would  have  retained  his  former  return 
and  he,  instead  of  the  land  owner,  would  have  acquired 
and  retained  the  5  per  cent  additional  differential  net 
value. 

The  user  of  land-forms,  as  user,  is  vitally  interested  in 
the  welfare  of  the  man  who  produces  labor-forms  of  the 
same  kind  upon  the  economic  margin. 


CHAPTER  XV. 

OF  GROUND  RENT,   WAGES,  AND  INTEREST. 

Let  US,  then,  seek  the  true  laws  of  the  distribution  of  the 
produce  of  labor  into  wages,  rent  and  interest.  The  proof 
that  we  have  found  them  will  be  in  their  correlation — that 
they  meet,  and  relate,  and  mutually  bound  each  other. 

Henry  George. 

People  who  have  at  home  some  kind  of  property  to  apply 
their  labor  to,  will  not  sell  their  labor  for  wages  that  do  not 
afford  them  a  better  diet  than  potatoes  and  maize. 

Laing's  Notes  of  a  Traveler. 

We  have  seen  that  when  use  is  made  of  a  land-form 
which  yields  more  than  the  marginal  return,  ground  rent 
emerges  and  manifests  itself  in  an  annual  value  which,  in 
present  conditions,  may  be  collected  from  a  tenant,  or  may 
be  enjoyed  by  the  owner  as  a  differential  value,  if  he  uses 
the  land-form.  In  either  case  future  ground  rent  is  an- 
ticipated and  appears  as  the  ground  value  of  the  land- 
form  ;  and  in  any  event,  the  starting  point  in  the  study  of 
the  phenomenon  of  ground  rent  is  the  upper  limit  of  the 
marginal  return. 

In  a  new  country  where  but  few  land-forms  are  util- 
ized, and  these  are  of  substantially  equal  utility,  no  one 
receives  anything  in  excess  of  the  marginal  return,  and 
land-forms  neither  bear  ground  rent  nor  have  ground 
value.  But  as  soon  as  it  becomes  necessary  for  some  set- 
tler to  occupy  and  use  a  land-form  of  inferior  quality  or 

184 


GROUND  RENT,   WAGES,  AND  INTEREST         185 

position,  or  both,  a  distinction  arises,  and  his  annual 
product  becomes  the  marginal  return.  All  the  superior 
land-forms  now  bear  ground  rent.  But  as  the  community 
grows,  not  only  do  other  and  still  inferior  land-forms  nec- 
essarily come  into  use,  but  the  land-forms  of  the  original 
settlement  cease  to  be  of  equal  utility,  and  differences  of 
ground  rent  arise  among  them.  The  general  store,  the 
blacksmith  shop,  the  railroad  station,  and  the  post-office 
appear,  and  nearness  to  these  becomes  a  principal  element 
of  land  value  in  that  community.  As  the  community 
grows,  the  difference  in  ground  rents  becomes  greater  and 
greater,  and  the  question  of  location  rather  than  of  fer- 
tility becomes  of  greater  and  greater  importance.  But  in 
any  community,  however  great,  that  value  which  lies  back 
of  the  entire  question  of  ground  rent  is  the  marginal 
return.  When  a  farm  tenant  gives  half  his  crop  for  the 
exclusive  use  of  a  given  land-form  for  one  year,  it  is  be- 
cause he  can  do  so  and,  all  things  considered,  still  retain 
as  his  own  an  amount  equal  to  the  marginal  return. 

We  have  so  far  considered  men  as  exerting  their  labor- 
power  for  their  own  direct  benefit  or,  in  other  words,  as  em- 
ploying their  own  labor.  All  men  do  not  do  this,  however. 
Instead  of  producing  some  labor-form  for  exchange,  many 
men  sell  their  labor-power  to  others,  or  as  it  is  commonly 
expressed,  work  for  wages,  for  a  salary,  or  for  a  commis- 
sion. In  all  such  cases  the  amount  of  wages,  salary  or 
commission — we  shall  use  '"wages"  as  an  inclusive  term — 
in  normal  conditions  is  governed  by  the  marginal  return. 
An  employer  of  labor  offers  as  compensation  the  lowest 
sum  which  he  can  induce  another  to  accept.     But  in  ordi- 


186  BISOCIALISM— ECONOMICS 

nary  circumstances  no  one  will  work  for  wages  which  are 
less  than  the  marginal  return  to  self-employed  labor  of  the 
same  grade.  On  the  other  hand,  if  wages  should  become 
perceptibly  greater  than  such  marginal  return,  men  upon 
the  economic  margin  would  cease  self-employment  and 
seek  service  with  others.  The  marginal  return  to  self- 
employed  labor  is  the  determiner  of  wages.  The  solution 
of  the  wages  question  is  contained  in  this  simple  state- 
ment. It  is  not  our  present  purpose,  however,  to  attempt 
to  solve,  in  detail,  this  and  related  questions,  but  to  fur- 
nish data  for  their  solution. 

When  a  man  has  stored  up  the  utility  of  his  labor-power 
in  capital-forms,  he  may  seek  advantage  of  this  stored  up 
utility  by  using  such  capital-forms  himself,  or  by  selling 
them  to  another,  either  outright,  or  for  a  limited  time.  If 
he  sells  them  outright,  he  receives  his  pay  in  market  price, 
which  is  determined  by  the  marginal  pair,  and  these,  as  we 
have  seen,  are  the  occupiers  of  the  economic  margin,  and 
receive  for  their  labor  the  marginal  return;  if  he  sells 
them  for  a  limited  time,  he  receives  his  return  in  the  form 
of  interest.  The  amount  of  this  return  is  subject  to  the 
universal  law  of  the  market.  As  a  capitalist  he  seeks  as 
great  a  return  as  he  can  induce  any  other  person  to  give ; 
the  borrower,  on  the  other  hand,  gives  as  little  as  possible. 
The  method  of  the  market  is  then  precisely  the  same  as  if 
the  capital-forms  were  for  sale  outright.  The  price — the 
rate  of  interest — is  fixed  by  the  marginal  pair.  The  mar- 
ginal buyer,  or  borrower  of  pure  capital,  tends  to  be  the 
user  of  the  economic  margin. 

Upon  the  margin  the  opportunities  for  the  reduction 


GROUND   RENT,    WAGES,   AND   INTEREST         187 

of  the  disutilities  of  time  are  less  than  upon  superior  land- 
forms,  and  the  return  for  the  use  of  capital-forms  is  there 
least  of  all.  If  the  bidding  of  the  marginal  producer  is 
necessary  to  exhaust  the  supply  of  pure  capital  offered, 
his  bid  fixes  the  rate  of  interest  for  the  whole  market,  and. 
all  borrowers  take  advantage  of  this  rate.  If  the  supply  of 
pure  capital  is  so  small  that  the  lowest  necessary  bor- 
rower is  found  Ijcfore  the  marginal  producer  is  reached, 
still  it  is  this  lowest  borrower,  whose  demand  is  necessary 
to  exhaust  the  supply  of  such  capital,  that  fixes  the  rate 
of  interest  for  the  entire  market.  He  occupies  the  mar- 
ginal land-form  among  those  land-forms  upon  which  bor- 
rowed capital  is  used. 

Whether  used  to  assist  labor-power  in  overcoming  the 
disutilities  of  matter,  or  directly  in  overcoming  the  dis- 
utilities of  time,  the  return  to  capital-forms  is  governed 
by  the  same  laws  as  the  return  to  labor-power.  Like  labor- 
power,  the  amount  and  efficiency  of  capital-forms  tends  to 
increase  with  increase  of  population  and  ^dth  progress  in 
the  industrial  arts.  In  a  new  community  nearly  all  produc- 
tion is  necessarily  directed  toward  acquisition  of  satis- 
forms.  But  as  the  community  grows,  more  and  more  labor- 
forms  are  diverted  for  use  as  capital-forms.  While  the  com- 
munity is  new  and  capital-forms  scarce,  the  marginal  pro- 
ducer occupies  one  of  the  most  advantageous  land-forms 
and  can  pay  as  high  rate  of  interest  as  any  one  in  the  com- 
munity. Tlie  little  pure  capital,  therefore,  that  is  avail- 
able will  bear  a  high  rate  of  interest. 

When  the  community,  has  reached  that  stage  of  growth. 
in  which  all  land-forms  available  are  occupied,  the  mar- 


188  BISOCIALISM— ECONOMICS 

ginal  producer  occupies  the  poorest  land-forms  of  all  and 
pure  capital  used  by  him  will  give  a  comparatively  small 
return.  In  the  meantime  the  amount  of  pure  capital  for 
investment  has  increased  in  proportion  to  the  growth  of 
the  community,  and  the  marginal  producer  must  use  such 
capital  in  order  to  exhaust  the  supply.  In  such  circum- 
stances he  becomes  the  marginal  bidder  for  pure  capital, 
and  his  bid  fixes  the  rate  of  interest.  The  return  to  pure 
capital  in  the  hands  of  the  marginal  user  is  the  determiner 
of  the  rate  of  interest  for  all  such  capital.  This  marginal 
return  is  governed  by  the  return  to  pure  capital  which  can 
be  acquired  upon  the  land-form  occupied  by  such  mar- 
ginal user.  So  that  whether  we  consider  the  question  of 
ground  rent,  of  wages,  or  of  interest,  we  are  carried  back 
to  the  return  of  labor-power  and  capital-forms  upon  the 
land-forms  at  the  economic  margin. 

The  nature  and  laws  of  wages,  interest,  and  ground  rent 
may  be  epitomized  in  the  following  descriptive  statements: 

Wages  in  any  given  case  are  determined  by  the  marginal 
return  open  to  similar  labor-power. 

Interest  in  any  given  case  is  determined  by  the  marginal 
return  open  to  pure  capital. 

Ground  rent  in  any  case  is  determined  by  the  excess  of 
net  value  or  net  salvage  acquired  upon  the  land-form  in 
question  over  that  acquired  with  like  disutility  upon  the 
marginal  land-form  put  to  similar  uses. 

The  law  of  wages  which  we  have  formulated  may  be 
applied  to  the  compensation  received  for  any  exertion  of 
labor-power,  physical  or  mental.  It  does  not  imply  that 
the  compensation  of  a  skilled  physician,  the  superintendent 


GROUND  RENT,   WAGES,  AND  INTEREST         189 

of  a  large  business,  or  of  a  college  professor,  is  determined 
by  the  return  which  would  be  open  to  that  particular 
physician,  superintendent,  or  professor,  if  he  were  com- 
pelled to  become  a  day  laborer  upon  a  marginal  land-form. 
This  is  not  true.  There  is  no  room  for  the  exertion  of  the 
distinctive  labor-power  of  any  of  these  men  upon  the  mar- 
ginal land-form  used  for  the  raising  of  potatoes,  corn  or 
wheat.  But  there  is  somewhere  in  the  society  in  which 
they  labor  an  opportunity  which  is  the  least  remunerative 
of  all  those  open  to  men  of  similar  skill  and  ability,  and  it 
is  the  return  resulting  from  this  marginal  opportunity 
which  constitutes  the  marginal  return  for  their  respective 
professions.  The  return  to  a  professional  man  is  greater, 
however,  in  a  community  where  the  artisan  is  well  paid 
than  where  he  is  poorly  paid ;  and  the  artisan  fares  better 
where  the  wages  of  common  labor  are  high  than  where 
they  are  low.  So  that  although  wages  in  any  given  case 
are  directly  determined  by  the  marginal  return  open  to 
similar  lahor-power,  yet,  in  the  last  analysis,  the  pros- 
perity of  all  men  not  the  beneficiaries  of  artificial  condi- 
tions is  based  upon  the  return  acquired  by  the  man  who 
exerts  common  labor-power  at  the  economic  margin. 

Not  only  has  the  nature  and  origin  of  the  economic 
basis  of  interest  furnished  the  basis  of  interminable  dis- 
putes, but  the  very  existence  of  any  such  economic  basis 
has  been  denied.  Bochm-Bawerk  in  an  exhaustive  treatise 
of  two  volumes  classifies  and  criticises  the  leading  eco- 
nomic writers  with  reference  to  eleven  different  theories 
of  capital  and  five  of  interest,  and  then  expounds  a 
twelfth  theory  of  capital  and  a  sixth  theory  of  interest 


190  BISOCIALISM— ECONOMICS 

as  essentially  his  own.  Notwithstanding  all  these  theories 
of  interest,  we  have  been  obliged  to  work  out  another  in 
conformity  with  our  definitions  and  doctrines  of  utility, 
disutility,  value  and  cost,  in  order  accurately  to  classify  all 
the  phenomena  of  the  normal  market,  and  to  bring  Eco- 
nomics into  harmony  with  related  sciences. 

By  the  assistance  of  auxiliary  capital,  labor-power  ac- 
quires more  utility  in  the  same  time;  by  the  use  of  pure 
capital  an  additional  utility  is  acquired  and  enjoyed  now 
rather  than  at  some  future  time.  The  utility  of  auxiliary 
capital  does  not  differ  from  that  of  labor-power  in  kind, 
but  simply  adds  to  its  effectiveness;  while  the  utility  of 
pure  capital  is  essentially  different  in  kind  and  accom- 
plishes an  end  which  is  impossible  to  labor-power  alone. 
It  overcomes  the  disutility  of  time  by  rendering  unneces- 
sary, or  by  diminishing,  the  irksomeness  of  waiting — that 
irksomeness  which  Milton  aptly  recognized  when  he  said : 

"They  also  serve  who  only  stand  and  wait." 

Interest  does  not  arise  from  any  productivity  of  capital, 
either  natural  or  artificial;  nor  is  it  the  reward  of  absti- 
nence upon  the  part  of  the  lender;  nor  simply  an  agio  or 
premium  arising  from  the  exchange  of  present  for  future 
goods  (Boehm-Bawerk)  ;  nor  is  it  that  part  of  the  product 
which  results  from  the  use  of  capital-forms  in  production 
as  is  commonly  believed.  It  is  the  net  value  which  arises 
in  production  from  the  utility  of  capital-forms  in  over- 
coming the  disutility  of  time.  Were  it  not  for  this  dis- 
tinctive disutility,  the  utilty  of  pure  capital-forms  would 


GROUND  RENT,   WAGES,   AND   INTEREST         191 

not  arise,  the  phenomenon  of  economic  interest  would  not 
exist. 

Interest,  in  the  first  instance,  applies  only  to  the  use  of 
pure  capital.  But  since  all  values  are  resolvable  into 
money,  and  since  all  capital-forms  are  interchangeable  in 
the  market  and  may  be  used  interchangeably  as  auxiliary 
or  pure  capital  in  production,  commercial  interest  is  paid 
upon  all  borrowed  capital  regardless  of  the  use  to  which 
it  is  put.  Its  price — the  rate  of  interest — is  determined 
by  the  distinctive  utility  of  capital-forms  to  the  marginal 
user,  and  this  is  their  utility  to  him  as  pure  capital.  After 
money  is  borrowed  it  may  be  invested  in  pure  capital, 
auxiliary  capital,  or  not  used  at  all.  The  result,  so  far  as 
commercial  or  legal  interest  is  concerned,  is  the  same — it 
must  be  paid.  But  only  when  borrowed  money  is  invested 
in  pure  capital  does  any  economic  interest  arise  out  of 
which  commercial  interest  can  be  paid  without  loss  to  the 
borrower.  This  accounts  for  the  fact  that  so  many  com- 
mercial enterprises  based  upon  borrowed  capital  fail.  In 
order  to  succeed  it  is  not  enough  that  such  capital  is  used 
to  assist  labor-power  in  changing  the  form  and  position 
of  material  substances.  All  that  capital-forms  are  worth 
for  this  purpose  is  covered  by  their  price  when,  in  the 
form  of  machinery,  etc.,  they  are  bought  in  the  open 
market.  When  bought  with  borrowed  mone}^,  capital- 
forms  must  be  used  to  overcome  the  disutility  of  time  as 
well  as  of  matter.  Their  utility  for  the  former  purpose 
is  paid  for  in  interest;  for  the  latter,  in  price.  Unless  put 
to  both  uses  borrowed  capital  must  necessarily  result  in 
loss,  and  the  commercial  interest  must  ho  paid,  if  at  all. 


192  BISOCIALISM— ECONOMICS 

from  other  earnings.  It  is  for  this  reason  that  those  omni- 
socialists  are  substantially  right  who  say  that  the  average 
man  can  not  pay  interest  and  survive  in  present  business 
conditions.  But  present  conditions  are  influenced  by 
juridical  laws,  and  so  are  not  within  the  province  of  our 
immediate  inquiry. 

It  ought  to  be  perfectly  clear  from  what  has  been  said 
that  what  is  commonly  denominated  rent  is  usually  made 
up  of  both  ground  rent  and  interest.  Ground  rent  is  paid 
for  the  use  of  bare  land-forms,  irrespective  of  any  and  all 
improvements  thereon.  All  buildings  or  other  improve- 
ments which  have  been  added  to  the  original  land-form 
by  labor-power  are  labor-forms,  and  when  used  as  capital- 
forms  their  distinctive  return  is  interest  and  not  ground 
rent.  Unless  this  distinction  is  clearly  perceived  and  con- 
stantly kept  in  mind,  no  final  conclusions  worthy  to  be 
called  scientific  are  possible.  In  the  study  of  Economics 
we  must  habitually  think  and  speak  in  the  terms  of  the 
science. 


CHAPTER  XVL 

OF  THE  ECONOMIC  STANDARD  OF  VALUE. 

A  man's  labor  for  a  day  is  a  better  standard  of  value  than 
a  measure  of  any  produce,  because  no  produce  ever  maintains 
a  consistent  rate  of  productibility.  John  Ruskin. 

Labour,  therefore,  is  the  only  universal,  as  well  as  the  only 
accurate  measure  of  value,  or  the  only  standard  by  which  we 
can  compare  the  values  of  different  commodities  at  all  times 
and  at  all  places.  Adam  Smith. 

The  primar}'^  disutilities  of  the  economic  world  are  the 
same  as  those  of  the  physical  world — the  disutilities  of 
matter,  time  and  space.  Aside  from  these  disutilities  of 
which  they  treat  in  common.  Physics  treats  of  energy  and 
its  effects;  and  Economics,  of  value  and  its  causes.  The 
physicist  looks  upon  energy  as  initiative,  while  the  econo- 
mist views  value  as  resultant.  Aside,  however,  from  the 
variance  made  necessary  by  the  difference  in  the  point  of 
view,  the  method  of  the  economist  is  similar  to  that  of  the 
physicist. 

The  physicists  have  need  of  a  universal  standard  of 
energy  by  means  of  which  standard  all  measurable  forces 
may  be  compared.  They  have  secured  such  a  standard 
in  the  only  possible  way — by  making  it  contain  a  unit  of 
each  disutility.  In  physics  the  disutility  of  matter,  as  a 
resistance  to  energj-,  is  represented  by  its  resistance  to  the 
force  of  gravity,  that  is,  by  weight ;  the  disutility  of  space, 
by  distance ;  and  the  disutility  of  time,  by  time  itself.    For 

193 


194  BISOCIALISM— ECONOMICS 

many  purposes  of  measurement  a  unit  of  weight  only  is 
required ;  for  other  measurements  a  unit  of  distance  or  of 
time  will  suffice;  in  still  other  cases  a  unit  including 
weight  and  distance,  but  not  time,  is  a  convenience — as 
the  foot  pound.  But  weight,  distance  and  time  are  all 
requisite  for  a  universal  standard  for  the  measurement 
of  energy.  This  universal  or  absolute  standard  consists 
of  an  energy  which  will  move  a  given  mass  a  given  dis- 
tance against  the  force  of  gravity  in  a  given  time.  More 
specifically,  it  is  a  force  which  will  move  one  pound  against 
the  force  of  gravity  one  foot  in  one  second,  and  is  known 
as  the  "foot  pound  second"  unit  of  energy. 

In  a  similar  way  any  universal  standard  for  measure- 
ment of  value  must  contain  a  unit  of  each  disutility.  In 
Economics  the  disutility  of  matter  is  represented  by  the 
labor-power  necessary  to  overcome  it;  the  disutility  of 
space,  by  the  location  and  area  of  particular  land-forms; 
and  the  disutility  of  time,  by  time  itself.  As  value  is  a 
resultant  of  economic  conditions  and  not  a  force,  so  its 
standard  of  measurement  must  be  a  resultant  and  not  a 
force.  The  standard  unit  of  value  must  be  the  resultant 
of  a  unit  of  labor-power  exerted  upon  a  unitary  or  mar- 
ginal land-form  for  a  unit  of  time.  It  must  be  a  "labor 
time  land"  unit  of  value ;  it  can  then  furnish  the  basis  of 
measurement  for  any  and  all  normal  values  whether  dis- 
tinctively labor  values,  capital  values,  or  land  values. 

There  is  this  characteristic  difference  between  the  phys- 
ical and  the  economic  standards.  In  the  former,  the  ele- 
mentary units  of  matter,  time  and  space  may  all  be 
definitely  fixed,  and  the  resultant  standard  is  therefore 


THE  ECONOMIC  STANDARD  OF  VALUE.    195 

constant.  One  pound  (at  the  level  of  the  sea)  is  the  same 
yesterday,  to-day  and  to-morrow.  One  foot  is  the  same 
at  all  times  and  in  all  places.  One  second  is  a  fixed  period 
of  duration  everywhere.  Having  a  fixed  standard  constant 
in  all  its  elemental  units,  Physics  ranks  among  the  exact 
sciences.  Not  so  with  Economics.  Two  of  the  elemen- 
tary units  of  its  standard  are  subject  to  change,  and  the 
resultant  standard  is  therefore  variable.  This  it  is,  more 
than  aught  else,  which  has  caused  such  great  confusion  in 
thought  upo-n  the  subject  of  value,  and  which  accounts  for 
the  chaotic  condition  of  economic  discussion  viewed  as  a 
whote. 

The  elementary  units  of  the  economic  standard  which 
are  subject  to  variation  are  those  of  matter  and  space — 
typified  by  labor-power  and  land-forms.  We  may  choose 
a  unit  of  time  in  Economics,  as  in  Physics,  and  this  unit 
is  constant.  But  the  marginal  land-form  which  is  the 
unit  of  space  to-day  may  not  be  so  next  year,  and  as  the 
marginal  land-fo-rms  shift  from  one  location  to  another, 
the  resistances  to  labor-power  of  the  matter  of  which  they 
are  composed  will  vary  also.  Moreover,  an  exact  and  con- 
stant unit  of  labor-power  is  unattainable.  The  utmost  that 
the  economist  can  do  is  to  determine  upon  a  practical 
standard  which  contains  elementary  units  of  all  three 
kinds  and  then  develop  the  laws  which  govern  their  varia- 
tions. 

The  nearest  approach  to  constancy  in  the  matter  of 
labor-power  is  in  what  we  have  called  common  labor- 
power.     We  repeat  the  definition : 


196  BISOCIALISM— ECONOMICS 

Common  Labor-Power  is  labor-power  exerted  with  only 
ordinary  skill  and  unattended  by  the  use  of  capital-forms. 

The  most  constant  return  to  common  labor-power  is  that 
which  results  from  its  exertion  upon  the  economic  margin. 
And  for  all  purposes  one  day  is  the  most  practical  unit  of 
time.  We  may  therefore  determine  upon  and  define  the 
economic  standard  of  value  as  follows: 

The  Economic  Standard  of  Value  is  that  value  which 
results  from  the  exertion  of  one  day's  common  labor-power 
upon  the  economic  margin. 

Values  are  commonly  expressed  in  terms  of  money. 
For  this  reason  the  monetary  unit,  or  legal  standard  of 
value,  should  coincide  with  the  economic  standard.  The 
fact  that  it  does  not  has  given  rise  to  a  world-wide  discus- 
sion concerning  the  monetary  standard  of  value,  in  which 
discussion  neither  side  has  taken  economic  grounds  as  the 
basis  of  its  contention.  The  "money  question"  is  no 
nearer  a  permanent  solution  than  heretofore.  Neither 
the  "single"  nor  the  "double"  standard  of  coinage  includes 
all  the  elemental  units.  But  these  matters  belong  to  Po- 
litical Economy. 

It  will  be  noted  that  the  economic  standard  of  value 
differs  from  the  marginal  return  in  two  of  its  elements. 
The  time  of  the  economic  standard  is  limited  to  one  day 
and  its  labor-power  to  common  labor.  The  marginal  re- 
turn may  apply  to  any  grade  of  labor-power  exerted  for 
any  length  of  time,  provided  it  be  exerted  upon  the  eco- 
nomic margin.  The  gist  of  the  marginal  return  is  that 
it  is  the  result  of  any  given  disutility  exerted  for  any  given 
time  upon  the  economic  margin ;  while  the  economic  stand- 


THE  ECONOMIC  STANDARD  OF  VALUE     197 

ard  is  limited  to  a  particular  disutility  exerted  for  a 
^particular  time  upon  the  margin.  The  marginal  return 
furnishes  not  an  economic  measure,  but  an  economic  start- 
ing point  for  the  measurement  of  values,  and  a  basis  for 
the  comparison  of  not  values.  It  is  itself  measured  by  the 
economic  standard  of  value. 

The  marginal  return  to  the  common  laborer,  when  con- 
fined to  one  day's  time,  is  the  same  as  the  economic  stand- 
ard. If  a  man  has  unusual  skill,  his  return  upon  the 
margin  is  greater  than  that  of  the  common  laborer,  but 
in  the  exchanges  of  the  market  the  common  laborer  tends 
to  be  one  of  the  marginal  pair,  not  only  of  the  labor 
market,  but  of  the  market  in  which  the  products  of  superior 
skill  are  sold.  Besides,  the  difference  in  skill  between  the 
two  is  only  relative.  The  greater  the  return  to  common 
labor  upon  the  margin  the  greater  the  return  to  superior 
skill  applied  thereon,  and  vice  versa.  The  common  laborer 
fixes  the  marginal  wage.  The  skilled  laborer  may  not 
despise  the  "mud  sill."  The  artisan  will  look  in  vain  for 
higher  wages,  if  he  takes  his  eyes  from  the  man  who  works 
at  the  margin  and  fixes  them  upon  his  employer  because 
of  the  latter's  ability  to  pay.  The  market  for  wages,  as 
for  aught  else,  is  regulated,  not  from  the  top,  but  from 
the  bottom.  The  most  important  personage  in  the  whole 
field  of  Economics  is  the  man  who  exerts  common  labor 
at  the  marffin. 


PART    I  I 

POLITICAL     ECONOMY 


Watchman,  What  of  the  night? 

The  watchman  said,  The  morning  cometh. 

Isaiah. 

Once  the  welcome  light  has  broken,  who  shall  say 
What  the  unimagined  glories  of  the  day? 
What  the  evil  that  shall  perish  in  its  ray? 

Aid  the  dawning,  tongue  and  pen; 

Aid  it,  hopes  of  honest  men; 

Aid  it,  paper;    aid  it,  type; 

Aid  it,  for  the  hour  is  ripe. 
And  our  earnest  must  not  slacken  into  play. 
Men  of  thought  and  men  of  action,  Cleab  the  Way! 

Lo!  a  cloud's  about  to  vanish  from  the  day; 

And  a  brazen  wrong  to  crumble  into  clay. 

Lo!    the  right's  about  to  conquer:     Clear  the  way! 

With  the  right  shall  many  more 

Enter  smiling  at  the  door; 

With  the  giant  wrong  shall  fall 

Many  others  great  and  small. 
That  for  ages  long  have  held  us  for  their  prey. 
Men  of  thought  and  men  of  action.  Clear  the  Wat! 

Charles  Mackay. 


200 


CHAPTEE  I. 

OF  THE  MEDIUM  OP  EXCHANGE. 

Whoso  has  sixpence  is  sovereign  (to  the  length  of  six- 
pence) over  all  men;  commands  cooks  to  feed  him,  philoso- 
phers to  teach  him,  kings  to  mount  guard  over  him, — to  the 
length  of  sixpence.  Thomas  Carlyle. 

The  earliest  form  of  exchange  was  that  of  barter.  A 
man  with  an  extra  beaver  skin  and  in  need  of  a  pair  of 
moccasins  was  compelled  to  seek  a  man  with  an  extra  pair 
of  moccasins  and  a  desire  for  a  beaver  skin.  In  cases 
where  even  trade  was  not  feasible  the  balance,  or  '^boot," 
was  paid  in  any  other  available  labor-form  which  might 
be  agreed  upon.  In  the  course  of  time  certain  labor-forms 
which  are  generally  desired  came  to  be  used  as  mediums 
of  exchange.  Finally,  wherever  they  were  available,  gold 
and  silver  came  into  use  as  current  barter  metals  because 
they  were  not  only  generally,  but  universally  desired.  Any 
labor-form  which,  because  of  its  general  or  universal  de- 
sirability, passed  freely  from  hand  to  hand  in  the  market 
acquired  a  distinctive  utility  as  a  medium  of  exchange  and 
became  a  current  trade-form.  All  current  trade-forms 
more  or  less  completely  perform  the  functions  of  money. 

Any  basic  medium  of  exchange  naturally  and  neces- 
sarily furnishes  a  unit  for  the  measurement  of  values. 
Mere  barter  furnishes  no  unit  of  value,  and  this  is  one 
of  its  greatest  inconveniences.  It  is  not  long,  however, 
in  any  community  where  exchange  becomes  a  matter  of 

201 


202  BISOCIAUSM— POLITICAL   ECONOMY 

any  importance  before  some  one  article  of  barter  is  singled 
out  as  a  common  measuring  unit  for  all  exchanges  and  so 
becomes  the  medium  of  exchange.  In  that  rudimentary 
state  of  society  in  which  subsistence  is  gained  chiefly  by 
the  hunting  and  trapping  of  wild  animals  the  unit  of 
value  is  usually  a  skin.  The  particular  kind  of  skin  varies 
with  the  locality,  but  in  each  case  some  kind  is  fixed  upon 
by  common  acquiescence.  In  the  book  of  Job  reference  is 
made  to  "skin  for  skin/'  which  shows  that  at  that  early 
day  skins  were  used  as  money.  In  the  transactions  of  the 
Hudson  Bay  Company  in  America  the  beaver  skin  was  the 
unit  of  trade.  It  is  said  that  after  coins  came  into  com- 
mon use  in  the  transactions  of  fur  gatherers,  the  Indians 
continued  to  make  exchanges  in  terms  of  "skins"  rather 
than  in  terms  of  current  coin. 

In  the  early  pastoral  state  of  society  cattle  were  used 
to  pecform  the  rudimentary  functions  of  money.  From 
this  fact  originated  the  words  pecuniary  and  capital,  the 
former  being  derived  from  the  Latin  pectis,  cattle,  and  the 
latter  from  the  Latin  caput,  head,  cattle  being  counted  and 
exchanged  '%y  the  head." 

Aside  from  the  foregoing  examples  may  be  cited  cases 
in  which  wampum,  shells,  whale's  teeth,  amber,  olive  oil, 
various  kinds  of  grain,  tobacco,  salt,  iron,  leather,  brass 
and  even  pieces  of  wood  have  been  used  as  money,  and 
consequently  have  furnished  units  for  the  measurement  of 
values.  In  the  course  of  time,  however,  gold  and  silver 
became  the  universally  accepted  current  trade-forms  in 
the  principal  markets  of  the  world.  The  tendency  now  is 
to  confine  the  common  measure  of  all  values  to  a  single 


OF  THE  MEDIUM  OF  EXCHANGE  203 

trade-form — gold.  This  metal  in  high  degree  possesses 
most  of  the  requisites  for  the  performance  of  the  functions 
of  money.  Being  universally  desired,  it  passes  current 
everywhere;  being  divisible  into  coins  of  various  sizes,  it 
readily  furnishes  a  unit  for  the  measurement  of  current 
values.  In  it  values  can  readily  be  stored  in  small  com- 
pass and  safely  transported  from  place  to  place;  it  is 
durable  and  not  easily  counterfeited;  its  coins  may  be  re- 
converted into  bullion  without  any  loss  of  value.  As  a 
basis  for  metallic  coinage  it  has  no  superior.  It  covers 
the  traditional  requisites  of  money  as  set  out  in  standard 
works  on  Political  Economy  well  nigh  perfectly.  These 
requisites  are  all  based  upon  the  overcoming  of  the  dis- 
utility of  matter,  and  distinctively  apply  to  current  labor 
values. 

In  the  development  of  society,  however,  other  than  cur- 
rent labor  values  soon  appear.  With  the  advent  of  compe- 
tition for  the  ownership  and  use  of  land-forms,  land 
values  appear;  and  with  the  borrowing  of  capital-forms 
for  the  reduction  of  the  disutility  of  time,  capital  values 
arise.  The  gold  standard,  like  any  other  standard  of 
metallic  money,  contains  no  elemental  unit  of  value  which 
distinctively  takes  into  account  the  disutility  of  space;  nor 
does  it  contain  any  distinctive  recognition  of  the  disutility 
of  time. 

In  the  course  of  the  development  of  the  market  there 
arose  the  elements  of  debit  and  credit.  A  purchaser,  not 
having  ready  money  for  use  in  exchange,  was  entrusted 
by  the  seller  with  the  labor- form  desired  upon  a  promise 
to  pay  the  price  at  some  future  time.     At  first  these  prom- 


204  BISOCIALISM— POLITICAL   ECONOMY 

ises  were  oral,  but  after  the  art  of  writing  came  into  com- 
mon use  written  promises  were  made  and  charges  were 
entered  upon  books  of  account.  Out  of  the  latter  prac- 
tice grew  the  custom  of  charges  and  counter  charges, 
credits  and  counter  credits  between  two  men  with  an 
occasional  payment  by  one  or  the  other,  as  the  case  might 
be,  of  the  balance  due.  This  practice  curtailed  the  actual 
use  of  money  as  a  medium  of  exchange,  but  all  debits  and 
credits  were  bascxl  upon  tlie  standard  monetary  unit. 

Out  of  the  practice  of  giving  written  promises  to  pay 
grew  the  custom  of  passing  these  promises  from  hand  to 
hand  as  negotiable  paper.  This  still  further  curtailed  the 
use  of  coin  as  an  actual  medium  of  exchange,  although  the 
written  promises  were  based  upon  the  standard  unit  of 
metallic  coinage,  and  gold  or  silver  was  necessary  to  re- 
deem the  promises.  The  paper  debit,  the  distinctive 
characteristic  of  which  is  a  promise  to  pay,  evidenced  by  a 
writing  either  in  the  form  of  a  book  account  or  of  a 
promissory  note,  has  been  developed  in  modern  business  to 
a  high  degree.  It  involves  not  only  accounts  current  and 
promissory  notes  between  individuals,  but  a  traffic  in 
various  forms  of  indebtedness,  or  debits,  through  brokers, 
banks,  clearing  houses,  with  the  use  of  checks,  drafts,  bills 
of  lading,  bills  of  exchange,  warehouse  certificates,  stocks, 
bonds,  debentures,  consols,  etc.,  almost  without  number. 

Great  attention  is  paid  to  this  phase  of  modem  exchange 
in  all  treatises  on  money  and  political  economy,  and  it  is 
currently  stated  that  more  than  90  per  cent  of  all  ex- 
changes are  now  made  through  the  use  in  some  form  or 
other  of  "promises  to  pay."    But  all  these  promises  to  pay 


OF  THE  MEDIUM  OP  EXCHANGE  205 

are  based  upon  the  standard  unit  of  metallic  coinage  and 
their  only  function  in  exchange  is  still  further  to  reduce 
the  mechanical  friction  of  exchange — to  overcome  still 
more  completely  the  distinctive  disutility  of  matter.  The 
metallic  coins  must  exist  for  the  purpose  of  redemption. 
The  use  of  written  promises  to  pay,  or  paper  debits,  simply 
avoids  the  necessity  of  constantly  handling  and  transport- 
ing the  coins.  In  such  a  monetary  system  the  use  of  cur- 
rent paper  promises  to  pay  constitutes  a  labor  saving  de- 
vice of  great  effectiveness,  but  it  is  nothing  more  than  this. 
The  distinctive  disutilities  of  space  and  time  are  not  in 
any  wise  reduced.  They  are  changed,  it  is  true.  But  the 
change  is  a  mere  shifting  of  relative  values  as  between 
individuals — some  profiting  and  others  losing  by  the  proc- 
ess, as  when  the  monetary  standard  appreciates  or  depreci- 
ates in  value  from  time  to  time.  But  in  the  aggregate,  the 
disutilities  of  space  and  time  remain  the  same. 

There  is  another  form  of  paper  promise,  however,  of 
which  we  hear  but  little.  It  is  seldom  used,  and  seems 
to  be  but  little  understood.  It  is  that  form  in  which  the 
written  promise  is  not  a  promise  to  pay  but  to  receive. 
The  distinction  is  simple  but  extremely  significant.  Its 
significance  lies  in  the  fact  that  the  promise  to  receive 
furnishes  a  means  of  securing  a  medium  of  exchange  in- 
volving the  three  elemental  units  of  the  economic  standard 
of  value. 

Suppose  that  upon  an  island  dwelt  a  community  under 
a  system  of  law  and  land  tenure  similar  to  that  in  vogue 
in  England  and  America.  Suppose,  further,  that  all  the 
land  of  the  island  was  owned  by  one  man,  and  that  all 


206  BISOCIAUSM— POLITICAL   ECONOMY 

land-forms,  except  those  of  the  lowest  grade,  were  neces- 
sarily occupied  and  used  in  order  to  supply  the  wants  of 
the  community.  The  owner  would  receive  ground  rent 
from  every  land  user  except  those  who  might  occupy  land- 
forms  upon  the  margin.  Practically  every  man  upon  the 
island  would  be  his  debtor  in  some  amount  every  year.  On 
the  other  hand,  let  us  assume  that  the  owner  lived  upon 
the  island  and  spent  all  his  income  there  every  year, 
employing  all  grades  of  labor  from  common  labor  up  to 
the  most  skilled  professional  service.  In  such  circum- 
stances there  would  be  no  need  of  gold  or  silver  or  other 
precious  metal  as  a  medium  of  exchange  or  as  a  standard  of 
values,  current  or  future.  The  daily  wage  which  he  would 
pay  to  a  common  laborer  would  equal  the  daily  earnings  of 
the  man  who,  without  capital,  cultivated  the  economic  mar- 
gin. The  laborer  would  take  no  less  because  of  the  oppor- 
tunity open  to  his  labor  at  the  margin;  the  laborer  could 
get  no  more,  because,  if  he  did,  the  man  at  the  margin 
would  be  induced  to  leave  his  land-form  and  compete  for 
employment  at  the  hands  of  the  owner. 

Such  a  people  so  circumstanced  might  well  adopt  the 
economic  standard  of  value — a  day's  common  labor  upon 
the  economic  margin.  The  owner  could  employ  laborers, 
and  land  users  could  pay  their  rent  upon  that  basis.  For 
instance:  to  his  day  laborers  let  the  land  owner  give  a 
written  instrument  promising  therein  to  receive  such  in- 
strument from  any  person  at  any  time  in  pajTnent  of 
ground  rent  or  other  indebtedness,  in  lieu  of  one  day's 
common  labor.  This  instrument,  or  scrip,  would  pass  cur- 
rent for  one  day's  common  labor  anywhere  upon  the  island, 


OF  THE  MEDIUM  OP  EXCHANGE  207 

and  all  prices  would  be  based  upon  one  day's  common  labor 
as  a  unit  or  standard  of  value.  To  all  other  persons  fur- 
nishing him  with  labor,  or  service,  or  labor-forms,  let  the 
owner  give  similar  written  promises,  or  scrip,  according  to 
their  respective  values,  up  to  the  amount  of  his  annual  in- 
come from  ground  rent.  All  such  scrip  would  pass  current 
upon  the  island  and  metallic  money  might  be  unknown. 
Within  the  year  all  these  promises  would  be  "'redeemed" 
by  being  received  as  ground  rent,  as  we  have  assumed 
the  owner's  annual  rents  and  expenditures  to  be  equal. 
Inasmuch  as  all  material  progress  upon  the  island  would 
be  reflected  in  ground  rents,  no  better  index  of  the  volume 
of  business  or  of  the  "necessary  volume  of  currency"  could 
be  found. 

We  are  so  accustomed  to  think  of  something  tangible,  as 
gold  or  silver  coin  of  a  given  shape,  weight,  and  fineness, 
as  the  standard  of  value  that  it  is  difficult  to  conceive  of  a 
standard  composed  merely  of  certain  labor-power  exerted 
for  a  certain  time  at  a  certain  place.  Yet  we  know  that  a 
given  amount  of  labor-power  exerted  under  given  condi- 
tions will  result  in  the  production  of  a  given  labor-form. 
There  is  no  reason  in  nature  why  we  should  not  adopt  the 
given  labor-power,  so  conditioned,  as  a  standard  of  value, 
as  well  as  its  concrete  result — as  when  it  produces  the 
weight  of  gold  or  silver  contained  in  the  unitary  coin.  It 
can  not  be  said  that  the  value  of  a  day's  labor  upon  the 
margin  is  variable  while  the  value  of  a  piece  of  gold  is 
constant,  for  both  are  variable.  For  the  measurement  of 
current  values  the  variations  of  the  one  may  be  neither 
better  nor  worse  than  the  other.     But  for  the  measure- 


208  BISOCIALISM— POLITICAL   ECONOMY 

ment  of  future  values  the  difference  is  perceptible  and  ma- 
terial.    To  illustrate: 

Suppose  that  A  borrows  of  B  $1,000  to  be  repaid  at  the 
end  of  20  years  at  5  per  cent  interest  per  annum.  If  the 
monetary  standard  be  gold,  then  principal  and  interest 
must  be  paid  in  gold  or  its  economic  equivalent.  Sup- 
pose, further,  that  at  the  time  of  the  borrowing,  a  common 
day's  labor  is  of  the  value  of  $1  in  gold;  while  at  the  end 
of  20  years  it  is  of  the  value  of  $2  in  gold.  Then,  whereas 
A  borrowed  the  economic  equivalent  of  1,000  days'  com- 
mon labor,  he  can  repay  the  principal  with  the  equivalent 
of  500  days  of  such  labor.  Or,  suppose,  upon  the  other 
hand,  that  at  the  expiration  of  the  20  years,  common  labor 
is  worth  but  fifty  cents  per  day  in  gold.  Then  it  will 
require  the  economic  equivalent  of  2,000  days'  labor  to 
repay  the  principal  sum  instead  of  the  equivalent  of  1,000 
days'  labor.  In  the  one  case  the  disutility  of  repayment 
is  diminished  by  half;  in  the  other,  doubled.  These 
are  extreme  variations,  it  is  true,  but  they  illustrate  the 
principle,  and  it  is  a  well  known  fact  that  the  value  of  the 
gold  dollar  with  reference  to  a  day's  labor  does  vary.  The 
amount  and  the  direction  of  the  variation  is  not  material  to 
our  argument.  The  same  variations  which  affect  the  prin- 
cipal sum  borrowed  will  apply  to  the  interest  also. 

Let  us  now  suppose  that  A  borrows  of  B  $1,000  for  the 
same  term  and  at  the  same  rate,  and  that  at  the  time  of 
borrowing  the  amount  of  gold  now  called  one  dollar  and 
one  day's  labor  are  economic  equivalents.  If,  in  such  case, 
the  economic  standard  of  value  is  used,  then  at  the  end  of 
20  years  the  lender  is  entitled  to  receive,  and  the  borrower 


OF  THE  MEDIUM  OF  EXCHANGE  209 

must  pay  the  economic  equivalent  at  the  time  of  1,000 
days'  common  labor,  regardless  of  the  value  of  gold  or  of 
any  other  labor-form.  If  at  the  end  of  20  years  one  day's 
common  labor  will  purchase  twice  as  much  gold  as  at  the 
beginning  of  the  term,  this  fact  will  make  no  difference 
whatever  to  either  of  them,  as  it  will  also  purchase  twice 
as  much  of  everything  else  in  the  market,  other  things 
being  equal.  The  borrower  expected  to  return  1,000  days' 
labor  or  its  economic  equivalent,  and  he  returns  this  and 
no  more;  he  knew  in  advance  just  what  the  disutility  of 
his  task  would  be,  measured  in  common  labor,  and  this 
disutility  is  unchanged.  The  lender  had  parted  with  the 
stored  up  utility  of  1,000  days'  common  labor,  and  this 
is  exactly  what  he  receives  back  as  principal.  At  the  time 
of  the  loan  both  could  form  accurate  conceptions  of  what 
the  disutility  of  exerting  a  day's  common  labor-power 
would  be  20  years  thence;  but  neither  could  then  accu- 
rately determine  what,  in  20  years,  would  be  the  disutility 
of  obtaining  a  piece  of  gold  of  given  weight  and  fineness. 
The  disutility  of  the  latter  might  be  doubled  or  it  might 
be  cut  in  half — neither  could  tell  as  to  that. 

The  matter  of  the  standard  of  value,  whether  the  gold 
standard  or  the  economic  standard,  would  affect  not  only 
the  borrower  as  to  the  relative  disutility  of  repaying  the 
loan,  but  it  would  also  equally  affect  the  lender  as  to  the 
relative  utility  of  his  loan  after  repayment.  If  under 
the  gold  standard  common  labor  was  cheaper  by  half  than 
when  the  loan  was  made,  so  also  would  be  all  labor-forms 
which  he  might  desire  to  purchase.  This  would  double 
the  utility  of  his  money  in  the  market.     With  it  he  could 


210  BISOCIALISM— POLITICAL   ECONOMY 

then  purchase  the  fruits  of  2,000  days'  current  common 
labor.  But  if  the  value  of  labor  should  double  in  the  20 
years,  so  also  would  the  prices  of  all  labor-forms,  and  his 
money  would  buy  but  half  as  much  as  formerly.  With  it 
he  would  buy  only  the  fruits  of  500  days'  current  common 
labor. 

On  the  other  hand,  if  the  economic  or  labor  standard 
of  value  was  used,  the  values  of  all  labor-forms  would 
remain  relatively  imchanged.  However  prices  may  have 
changed  absolutely,  the  borrower  could  pay  his  debt  with 
the  fruits  of  1,000  days'  current  common  labor;  and  with 
the  money  so  repaid  the  lender  could  purchase  the  fruits 
of  1,000  days'  current  common  labor.  No  standard  of 
value  can  be  absolutely  constant;  and  the  only  standard 
which  can  be  relatively  constant  is  the  economic  standard 
— a  standard  based  directly  upon  all  the  elemental  units  of 
disutility. 

If  the  owner  of  all  the  land  upon  the  island  in  the 
illustration  we  have  used  were  also  its  absolute  ruler,  po- 
litically as  well  as  economically,  and  held  the  land  as 
sovereign  instead  of  citizen,  the  ground  rent  received  by 
him  would  be  public,  instead  of  private  revenue.  In  such 
case  his  expenditures  would  be  expenditures  of  State,  and 
his  promises  to  receive  would  be  government  paper. 
Ground  rent  would  be  paid  as  a  tax,  and  the  paper  money 
paid  out  by  the  government  to  its  employes  and  other 
creditors  would  become  current  credit-forms  redeemable 
in  payment  of  taxes — the  amount  of  each  man's  tax  or 
ground  rent  being  computed  in  terms  of  common  days' 
labor. 


OF  THE  MEDIUM  OF  EXCHANGE  211 

The  greenbacks  issued  by  the  United  States  government, 
being  promises  to  pay  coin,  are  evidences  of  public  indebt- 
edness, and  are,  therefore,  current  debit-forms.  In  the 
hands  of  the  holder  they  mean  that  he  is  entitled  to  re- 
ceive labor-forms — gold  and  silver  coins — from  the  gov- 
ernment. In  the  hands  of  the  holder  the  promises  to  re- 
ceive which  we  have  described,  if  such  were  issued  instead 
of  greenbacks,  would  mean  that  he  is  entitled  to  receive 
credit  to  that  amount  upon  his  taxes  or  other  indebtedness 
to  the  government.  If  he  had  no  personal  indebtedness 
to  the  government,  he  could  readily  pass  his  current  credit- 
forms  in  the  course  of  business  to  some  one  who  had. 

From  this  brief  discussion  we  learn  that  a  medium  of 
exchange  may  exist  under  any  one  of  three  forms :  current 
trade-forms,  current  debit-forms,  and  current  credit-forms. 
The  first  has  been  defined,  but  we  repeat  the  definition: 

A  Current  Trade-Form  is  a  trade-form  which  passes 
current  as  a  medium  of  exchange, 

A  Current  Debit-Form  is  a  written  evidence  of  debt 
which  passes  current  as  a  medium  of  exchange. 

A  Current  Credit-Form  is  a  written  evidence  of  credit 
which  passes  current  as  a  medium  of  exchange. 

The  United  States  employs  current  trade-forms  in  its 
coinage,  and  current  debit-forms  in  its  greenbacks  and 
treasury  notes  of  various  kinds.  National  bank  notes  are 
also  current  debit-forms.  If  this  government  should  pay 
its  employes  and  creditors  in  promises  to  receive,  redeem- 
able in  payment  of  taxes — or  other  indebtedness  to  the 
government — in  lieu  of  gold,  such  credit-forms  would  pass 
current,  but  gold  would  be  the  monetary  standard,  and  such 


212  BISOCIALISM— POLITICAL   ECONOMY 

a  system  would  not  distinctively  recognize  in  its  stand- 
ard of  value  the  disutilities  of  time  and  space.  The  dis- 
utility of  matter  would  be  greatly  lessened  by  destroying 
the  necessity  for  a  universal  struggle  for  gold;,  or  gold  and 
silver,  for  use  as  money.  If  the  United  States  should  go 
farther  and  adopt  the  economic  standard  of  value,  instead 
of  the  gold  standard,  as  the  basis  of  its  promises  to  receive 
it  would  recognize  in  its  standard  the  disutilities  of  both 
matter  and  time;  and  in  so  far  as  its  taxes  are  levied 
upon  bare  ground  values,  irrespective  of  improvements, 
its  standard  would  also  recognize  the  disutility  of  space. 
By  levying  all  its  taxes  upon  such  ground  values,  the  eco- 
nomic standard  of  value  would  be  made  complete. 


CHAPTER  11. 

OF  CURRENT  CREDIT-FORMS. 

They  (governments)  determined  to  try  whether  they  could 
not  *  *  *  make  a  piece  of  paper  issued  by  them  pass  for 
a  pound,  by  merely  calling  it  a  pound,  and  consenting  to 
receive  it  in  payment  of  taxes.  And  such  is  the  influence  of 
almost  all  established  governments,  that  they  have  generally 
succeeded  in  attaining  this  object:  I  believe  I  might  say  they 
have  always  succeeded  for  a  time,  and  the  power  has  only 
been  lost  to  them  after  they  had  compromised  it  by  the  most 
flagrant  abuse.  John  Stuart  Mill. 

Bank  paper  must  be  suppressed,  and  the  circulating  me- 
dium must  be  restored  to  the  nation,  to  which  it  belongs. 

Treasury  bills,  bottomed  on  taxes,  *  *  *  thrown  into 
circulation,  will  take  the  place  of  so  much  gold  and  silver, 

Thomas  Jefferson. 

During  the  first  year  of  the  Civil  War  the  United  States 
government  issued  "demand  notes/'  afterwards  knowTi  as 
greenbacks,  to  the  amount  of  approximately  $60,000,000, 
as  unlimited  legal  tender  for  all  debts  public  and  private.* 
These  notes  were  intended  to  circulate  as  money  and  were 
issued  in  denominations  of  convenient  size  for  this  pur- 
pose. The  notes  stated  upon  their  face  that  the  United 
States  of  America  promised  to  pay  the  bearer,  on  demand, 
the  sum  of  ten  dollars,  or  whatever  the  sum  indicated  by 
the  denomination  of  the  several  notes  might  be.     Xeither 


♦Issues  of  July  17.  1861,  February  12,  1862,  and  March  17, 
1862. 

213 


214:  BISOCIALISM— POLITICAL   ECONOMY 

the  laws  authorizing  their  issue  nor  the  notes  themselves 
stated  in  what  they  were  payable,  but  the  government 
announced,  through  its  Secretary  of  the  Treasury,  that 
they  were  payable  in  coin. 

Beginning  with  an  issue  of  $150,000,000,  authorized  in 
February,  1868,  other  greenbacks  were  authorized  during 
the  war  until  the  total  issues  reached  the  sum  of  $450,000,- 
000.  But  none  of  these  notes,  except  the  $60,000,000 
above  mentioned,  were  full  legal  tender  for  all  debts  pub- 
lic and  private.  All  subsequent  issues  contained  a  clause 
which  made  them  legal  tender  for  all  debts  except  duties 
on  imports  and  interest  on  the  public  debt.  That  is  to 
say,  the  government  issued  these  subsequent  notes  in  pay- 
ment of  all  of  its  current  expenses  (not  including  interest 
on  its  bonds),  but  it  would  not  receive  them  in  payment 
of  duties  on  imports  which  constituted  a  chief  source  of 
its  revenue. 

Of  the  $60,000,000  of  demand  notes  referred  to  $50,- 
000,000  were  taken  up  by  the  government  and  a  like 
amount  of  the  subsequent  notes  of  limited  legal  tender 
were  issued  in  their  stead.  But  $10,000,000  of  the  original 
unlimited  tender  notes  remained  in  circulation  throughout 
the  war. 

In  the  latter  part  of  December,  1861,  the  banks  of  the 
United  States,  by  concerted  action,  suspended  specie  pa}'-- 
ments;  that  is,  they  ceased  to  pay  out  gold  and  silver,  and 
began  to  transact  all  business  upon  a  paper  money  basis. 
The  government  also  ceased  to  pay  out  specie  except  as 
interest  upon  the  public  debt.  The  result  of  this  was  that 
all  demand  notes,  or  greenbacks,  of  the  government  of  the 


OF  CURRENT  CREDIT-FORMS  215 

limited  legal  tender  issues  began  to  depreciate  in  value, 
and  continued  to  do  so  until  in  July,  1864,  it  required 
$2.85  of  such  currency  to  purchase  $1.00  in  gold.  In  the 
language  of  the  market,  however,  instead  of  regarding 
greenbacks  as  at  a  discount,  gold  was  said  to  be  at  a  pre- 
mium, and  in  July,  1864,  gold  was  quoted  at  285. 

At  no  time  during  the  war  were  any  of  the  unlimited 
legal  tender  greenbacks  worth  less  than  gold.  The  $10,- 
000,000  referred  to  were  outstanding  during  all  that  time 
and  passed  current  as  the  equivalent  of  gold,  being  ac- 
cepted in  payment  of  duties  on  imports,  but  not  being,  in 
fact,  redeemable  in  coin  either  at  the  banks  or  at  the  gov- 
ernment treasury  after  the  suspension  of  specie  payments. 
The  reason  that  these  demand  notes  remained  at  par  with 
gold  could  not,  therefore,  have  been  because  they  were 
payable  in  coin  as  is  generally  supposed.  The  sole  reason 
was  that  they  were  receivable  at  the  custom  houses  in  pay- 
ment of  duties  due  to  the  government.  If  at  any  time 
they  had  been  deprived  of  this  quality,  they  would  at  once 
have  depreciated  to  the  level  of  the  greenbacks  of  the 
limited  legal  tender  variety. 

The  reason  of  all  this,  in  the  light  of  our  previous  dis- 
cussion, is  plain.  All  of  these  demand  notes  purported  to 
be  government  promises  to  pay,  and  so  were  current  debit- 
forms.  But  those  of  the  $60,000,000  first  referred  to 
contained  an  implied  promise  by  the  government  to  re- 
ceive them  in  payment  of  taxes  at  the  custom  houses,  and 
so  they  became  de  facta  current  credit-forms. 

If,  instead  of  reading  "On  demand,  the  United  States 
of  America  promises  to  pay  the  bearer  Ten  dollars,"  witb 


316  BISOCIALISM— POLITICAL  ECONOMY 

the  endorsement  of  the  unlimited  legal  tender  clause 
thereon^  one  of  these  notes  had  read:  "On  presentation 
hereof  the  United  States  of  America  will  receive  this  cer- 
tificate in  lieu  of  ten  dollars  in  payment  of  any  indebted- 
ness due  to  the  United  States  as  duties  on  imports  or 
otherwise/'  such  certificate  would  have  passed  current 
with  gold  at  its  face  value  for  the  reason  above  stated. 
But  in  that  case  the  true  reason  would  have  been  apparent, 
instead  of  being  obscured  by  the  fiction  of  redeemability 
in  coin  at  a  time  when  for  many  years  specie  payments 
were  suspended  and  redemption  in  coin  impossible. 

In  1875  congress  passed  an  act  which  provided  that  on 
January  1,  1879,  specie  payments  should  be  resumed  at 
the  United  States  treasury.  By  virtue  of  this  act  demand 
notes  which  had  exchanged  for  gold  at  the  ratio  of  $3.85 
for  $1.00  in  1864  were  exchanged  at  the  treasury  at  par 
with  gold  in  1879.  In  common  speech  these  greenbacks 
were  said  to  have  been  made  redeemable  in  gold  on  and 
after  January  1,  1879.  But  in  fact,  if  congress  had  sim- 
ply enacted  that  on  and  after  said  date  greenbacks  should 
be  received  at  par  in  payment  of  taxes  due  the  United 
States,  the  effect  would  have  been  just  the  same.  From 
this  discussion  it  may  be  seen  that  by  a  simple  change  in 
the  wording  of  its  greenback  currency  a  paper  money  based 
upon  the  gold  dollar  as  a  standard  could  be  utilized  by  the 
United  States  up  to  the  amount  of  the  average  annual 
expenses  of  the  government,*  exclusive  of  its  obligations 


*  About  $550,000,000  for  the  year  ending  July  1,  1903. 
During  this  year  about  $343,000,000  of  greenbacks  were  in 
circulation. 


OF  CURRENT  CREDIT-FORMS  217 

now  payable  in  gold.  But  in  order  to  put  the  finances  of 
the  nation  upon  an  economic  basis  the  true  standard  of 
value  should  displace  the  present  gold  standard,  and  the 
dailor  should  be  made  to  supplant  the  dollar  as  the  prac- 
tical unit  of  exchange. 

A  Bailor  is  a  current  credit-form,  representing  the  value 
of  one  day's  common  labor  on  the  economic  margin,  issued 
by  the  State  in  payment  for  services  and  satisforms,  and 
redeemable  by  the  State  in  receipt  for  taxes. 

In  case  this  plan  were  adopted  the  dailor  would  read 
substantially  as  follows : 

On  presentation  of  this  certificate  the  United  States  of 
America  will  receive  the  same  in  lieu  of  one  day's  com- 
mon labor,  or  the  value  thereof,  in  payment  of  any  taxes 
or  other  indebtedness  due  to  the  national  government. 

These  credit-forms  would  be  issued  in  denominations  of 
one,  two,  five,  ten,  twenty,  fifty,  one  hundred,  and  one 
thousand  dailors  in  like  manner  as  our  present  national 
currency.  They  would  be  paid  out  to  all  persons  furnishing 
labor-forms,  labor,  or  services  to  the  general  government. 
If  these  persons  owed  the  government  any  thing  in  taxes 
or  otherwise,  their  credit-forms  could  be  utilized  in  can- 
celing such  indebtedness.  If  not,  such  credit-forms  could 
be  passed  at  their  full  value  to  others  who  did  owe  taxes, 
and  in  their  hands  could  be  used  in  payment  of  such  taxes 
and  so  be  redeemed.  Such  credit-forms  would  thus  pass 
current  and  would  perform  all  of  the  characteristic  func- 
tions of  a  medium  of  exchange. 

It  is  claimed  by  the  advocates  of  metallic  money  that 
the  thing  chosen   to  circulate  as  a   medium  of  exchange 


218  BISOCIALISM— POLITICAL   ECONOMY 

must  have  a  high  degree  of  utility  for  some  other  purpose. 
This  is  necessarily  true  of  a  medium  of  exchange  which  is 
developed  directly  from  a  system  of  barter.  Historically 
it  is  true  that  all  money-forms  which  have  been  used  not 
only  as  a  medium  of  exchange,  but  as  a  standard  of  value, 
have  had  a  marked  utility  for  some  other  purpose.  But 
this  is  only  because  all  monetary  standards  hitherto  used 
have  developed  directly  from  barter  without  any  reference 
to  the  function  of  the  State  in  relation  to  the  market. 
If  the  State,  practically  without  cost,  can  furnish  some- 
thing highly  useful  as  a  medium  of  exchange  and  not  use- 
ful for  any  other  purpose,  surely  this  is  a  direct  economic 
gain.  The  utility  of  gold  and  silver  for  other  purposes 
will  not  be  affected,  and  the  supply  of  these  metals  for  use 
in  other  ways  will  be  greatly  increased ;  while  at  the  same 
time  the  new  medium  of  exchange  will  not  detract  from 
the  supply  of  any  other  useful  article. 

A  money-form  which  is  widely  used  for  other  purposes 
is  susceptible  to  all  the  fluctuations  of  value  which  result 
from  such  use.  This  is  a  thing  to  be  avoided,  and  it  can 
only  be  avoided  by  adopting  as  a  medium  of  exchange 
something  which  has  practically  no  other  utility.  In  this 
view  the  current  credit-form  is  the  most  desirable  of  all 
money-forms. 

It  is  next  urged  that  in  order  to  be  a  medium  for  the 
exchange  of  values,  a  thing  must  itself  be  of  value.  This 
is  true.  And  since  the  values  of  all  labor-forms  are  cre- 
ated by  labor-power,  what  is  more  valuable  than  labor- 
power  itself?  And  in  what  form  can  the  value  of  labor- 
power  be  manifested  better  than  in  a  certificate  attested 


OF  CURRENT  CREDIT-FORMS  319 

by  the  government  that  certain  labor  has  been  performed, 
and  that  the  laborer  is  entitled  to  his  reward?  This  is 
the  real  gist  of  the  certificate  which  we  have  called  a 
dailor.* 

The  third  requisite  of  a  money-form,  as  usually  stated, 
is  that  it  must  not  only  have  value,  but  it  must  also  be  a 
measure  of  value.  We  have  gone  farther  than  this  and 
have  shown  in  a  former  chapter  that  it  must  be  a  measure 
of  all  of  the  three  distinctive  forms  of  value,  viz.,  labor 
value,  capital  value,  and  land  value.  The  current  credit- 
forms  which  we  advocate  for  use  as  money  represent  a 
given  kind  of  labor-power — common  labor — exerted  for  a 
specified  time — one  day — at  a  given  place — the  economic 
margin.  This  furnishes  us  not  only  with  a  measure  for  all 
forms  of  value,  but  with  a  unit  or  standard  of  measurement 
— the  dailor.  Under  this  system  every  man  who  performs 
common  labor  for  the  public  will  receive  one  dailor  a  day. 
In  the  interchange  of  the  market  his  wages  will  purchase 
the  economic  equivalent  of  the  return  to  the  self-employed 
worker  upon  the  economic  margin.  For,  if  one  of  these 
should  fare  perceptibly  better  than  the  other,  there  would 
result  a  shifting  of  occupation  wliich  would  soon  equalize 
the  current  returns  of  these  two  classes  of  common  la- 
borers. Common  laborers  everywhere  would  necessarily 
receive  one  dailor  a  day,  or  its  equivalent,  as  the  return  for 
their  labor,  and  the  wages  of  the  common  laborers  would 
become  the  basis  for  the  payment  of  all  other  wages  and 


*  We  use  the  term  dailor  for  convenience  in  this  discussion. 
If  the  doctrines  of  this  chapter  were  adopted  the  word  dollar 
could  well  be  retained. 


220  BISOCIALISM— POLITICAL   ECONOMY 

for  the  measurement  of  all  industrial  returns.  In  this 
way  the  prosperity  not  only  of  the  government  employes, 
but  of  all  persons  performing  labor  or  services  or  engag- 
ing in  productive  enterprises,  would  directly  depend  upon 
the  status  of  the  man  at  the  margin. 

In  the  fourth  place  it  is  claimed  that  the  basic  money- 
form  in  any  country  should  be  made  of  such  material  as 
will  cause  it  to  pass  current  anywhere  in  the  world  at  sub- 
stantially the  same  value.  This  sounds  well,  but  it  is  a 
mere  matter  of  sentiment.  There  is  no  more  reason  why 
the  people  of  the  United  States  should  not  transact  all 
domestic  business  with  current  credit-forms  issued  by  the 
government  than  why  they  should  not  use  checks,  which 
are  negotiable  only  where  the  maker  is  known.  ^Vhereve^ 
the  credit  and  stability  of  the  government  are  recognized, 
its  credit-forms  will  pass  current  just  as  its  debit-forms — 
greenbacks  and  treasury  notes — pass  current  in  foreign 
countries  at  present.  And  then  as  now,  gold  and  silver 
may  still  be  coined,  the  stamp  of  the  government  certifying 
to  their  weight  and  fineness.  Such  coins  will  pass  cur- 
rent then,  as  at  present,  at  their  bullion  values  in  foreign 
markets  and  in  settling  the  balances  of  international  trade. 

In  the  fifth  place  it  is  a  prime  requisite  that  a  basic 
money-form  should  furnish  the  best  available  standard 
for  deferred  payments.  In  the  last  chapter  we  learned 
that  in  present  conditions  a  debt  contracted  now  and 
payable  twenty  years  hence  may  require  twice  as  much 
labor  to  repay  it  at  maturity  as  at  present.  And  on  the 
other  hand,  the  creditor  might  receive  the  labor  prod- 
ucts of  only  half  as  many  days  as  were  represented  by 


OF  CURRENT  CREDIT-FORMS  221 

his  money-forms  when  loaned.  But  by  the  substitution  of 
the  economic  standard  of  value  for  the  present  standard, 
and  the  dailor  for  the  dollar  as  the  unit  of  payment,  the 
same  number  of  days'  labor  would  be  returned  as  was  bor- 
rowed, let  the  loan  run  as  long  as  it  may.  The  dailor  fur- 
nishes the  only  fit  standard  for  the  making  of  deferred 
payments. 

In  the  sixth  place  a  monetary  system  must  readily  ac- 
commodate itself  to  the  varying  demands  of  trade.  We 
hear  a  great  deal  nowadays  about  the  necessity  for  an 
elastic  currency.  In  normal  conditions,  such  as  would 
prevail  under  bisocialism,  the  demands  of  trade  would 
be  much  more  unifoi-m  than  at  present,  and  such  fluctua- 
tions as  would  exist  from  time  to  time  would  have  econ- 
omic and  easily  ascertained  causes.  Such  fluctuations 
could  readily  be  anticipated  and  provision  could  be  made 
against  them.  Xo  man  or  set  of  men,  for  financial  gain, 
could  in  any  way  manipulate  the  supply  of  currency  as 
at  present.  For  this  reason  one  of  the  most  prolific  causes 
of  financial  stress  would  be  eliToinated.  Bisocialism  could 
have  no  Black  Fridays.  Arbitrary  expansion  and  con- 
traction of  the  currency  would  be  unknown. 

Again,  under  bisocialism  the  most  prolific  and  persistent 
of  all  causes  of  periodical  and  general  financial  depressions 
would  be  removed.  In  the  established  order  the  private 
appropriation  and  absolute  control  of  land-forms  and  the 
consequent  artificial  lowering  of  the  economic  margin 
gives  to  the  category  of  ground  rent  a  flagrantly  excessive 
share  of  the  net  values  of  production.  The  more  pros- 
perous the  times  the  higher  the  ground  rents;  the  greater 


222  BISOCIALISM— POLITICAL   ECONOMY 

the  struggle  for  advantageous  land-forms,  the  more  these 
are  taken  up  in  advance  of  actual  need  and  held  out  of 
use  for  a  price  which  finally  becomes  prohibitive.  The 
increase  of  rent  swallows  all  the  measurable  gains  of  ad- 
vancing civilization,  and  the  tribute  finally  becomes  more 
than  production  can  bear.  Business  men  begin  to  fail,  and 
every  failure  embarrasses  many  who  are  already  on  the 
verge  of  collapse.  Loss  begets  loss,  private  credits  be- 
come strained,  financial  accommodations  are  withdrawn, 
and  ruin  becomes  widespread.  Finally  ground  rents  are 
lowered,  business  enterprises  tend  to  recover,  make  gains, 
and  finally  prosper  openly.  Then  again  the  rent  line  is 
lowered,  ground  rents  rise  and  encroach  upon  the  earn- 
ings of  labor  and  capital,  and  the  same  catastrophe  is 
repeated,  but  with  ruin  more  widespread  than  before. 

Under  bisoeialism,  therefore,  with  a  currency  governed 
by  the  needs  of  the  nation  and  not  by  the  rapacity  of  the 
so-called  "monied  interest,"  and  with  healthful  production 
based  upon  a  normal  economic  margin,  violent  financial 
fluctuations  could,  have  no  place.  Gold  and  silver  would 
not  be  eliminated  as  money-forms.  Their  use  would  not 
be  confined  to  foreign  trade.  The  government  would  al- 
ways receive  them  at  their  actual  value  in  payment  of 
taxes.  The  dailor  and  the  dollar  would  circulate  together, 
the  former  being  the  standard  and  regulating  the  value 
of  the  latter  in  common  with  all  other  labor-forms.  Any 
approach  to  stringency  in  the  money  market  would  readily 
call  into  circulation  all  the  gold  and  silver  which  might 
be  required  for  domestic  trade.  An  unusual  demand  for 
these  metals  for  monetary  purposes  would  tend  to  raise 


OF  CURRENT  CREDIT-FORMS  233 

their  values  and  would  quickly  cause  them  to  be  with- 
drawn to  some  extent  from  other  uses.  Stability  is  a  great 
deal  better  quality  in  a  monetary  system  than  elasticity. 
In  securing  both  of  these  in  adequate  degree  nothing  can 
be  so  efficacious  as  normal  economic  conditions.  The  elas- 
ticity of  the  currency,  whether  it  be  great  or  small,  must 
be  a  natural  elasticity,  and  not  in  any  manner  or  degree 
subject  to  manipulation  by  any  man  or  class  of  men. 
Otherwise  it  were  better  to  have  no  elasticity  at  all. 

We  have  now  shown  that  the  current  credit-form  repre- 
sented by  the  dailor  has  the  requisite  utility  and  the  neces- 
sary value  of  a  medium  of  exchange ;  that  it  furnishes  both 
a  measure  and  a  unit  for  the  measurement  of  value;  that 
it  will  pass  current  without  question  at  home  and  may,  if 
necessary,  be  supplemented  by  the  use  of  metallic  money 
both  at  home  and  abroad ;  and  that  it  furnishes  the  stabil- 
ity required  by  an  ideal  standard  for  deferred  payments. 
These  constitute  the  prime  requisites  of  a  medium  of  ex- 
change. Subsidiary  to  these  the  following  requisites  are 
usually  mentioned  in  treatises  on  the  subject  of  money. 

A  money-form  must  have  in  marked  degree  the  quality 
of  convenience.  The  experience  of  the  present  day  shows 
that  in  this  respect  paper  currency  has  a  great  advantage 
over  coin  and  especially  over  gold.  In  current  transac- 
tions coin  is  but  little  used  except  for  change  and  the  pay- 
ment of  small  sums  of  money.  Under  the  system  of  credit- 
forms  above  proposed  it  would  doubtless  meet  the  con- 
venience of  the  people  to  coin  the  dailor  from  aluminum — 
a  metal  of  little  weight  and  now  of  triflinoj  value  in  itself — 


224  BISOCIALISM— POLITICAL   ECONOMY 

and  to  have  subsidiary  coins  of  the  usual  denominations 
made  from  aluminum,  nickel  and  copper. 

The  quality  of  durability  was  formerly  insisted  upon 
as  chief  among  the  subsidiary  qualities  of  money.  But 
under  a  system  of  current  credit-forms  this  quality  would 
become  one  of  least  importance.  In  the  usual  course  a 
credit-form  would  be  issued  for  current  expense  and  re- 
deemed in  receipt  for  current  taxes.  The  life  of  the  aver- 
age credit-form  would  not  exceed  one  year.  Whether  a 
given  credit-form  when  received  by  the  government  should 
be  re-issued  or  canceled  is  a  matter  of  administrative  de- 
tail which  we  need  not  now  determine.  Theoretically  it 
would    become    a    new    credit-form,    even    if    re-issued. 

Akin  to  the  foregoing  is  the  demand  usually  made  that 
the  ordinary  medium  of  exchange  should  furnish  an  in- 
destructible storehouse,  as  it  were,  for  the  preservation 
of  values  while  in  transit  and  in  hoarding  for  long  spaces 
of  time.  Gold  possesses  this  quality  in  high  degree,  and 
for  this  reason  it  is  urged  that  gold  is  the  material  most  fit 
for  a  circulating  medium  and  for  the  standard  of  value. 
But  under  the  economic  standard  of  value  and  a  system 
utilizing  credit-forms  as  currency,  gold  would  be  just  as 
available  for  the  safe  transportation  and  storage  of  values 
as  ever.  If  the  reasoning  of  the  standard  economists  upon 
this  point  were  true,  diamonds  would  make  even  a  better 
standard  of  value  and  medium  of  exchange  than  gold. 
Their  argument,  if  it  proves  anything,  proves  too  much. 

Portability  is  another  of  the  standard  demands  of  a  cir- 
culating medium.  In  this  respect  paper  currency  of  large 
denominations  has  everv  advantage  over  coin.     The  bulk 


OF  CURRENT  CREDIT-FORMS  225 

need  not  be  great  and  the  weight,  even  of  a  large  sum, 
is  insignificant. 

It  is  also  said  that  the  material  used  as  a  medium  of  ex- 
change should  be  susceptible  of  adequate  divisibility,  and 
that  the  different  divisions  should  be  readily  cognizable  by 
their  sizes  or  by  their  respective  appearances.  A  paper 
currency  yields  readily  to  this  demand  in  so  far  as  it  prop- 
erly extends.  Experience  has  shown  that  there  is  no  neces- 
sity whatever  for  making  a  ten  dollar  bill  one-half  the  size 
of  a  twenty  dollar  bill,  and  so  on  throughout  the  different 
denominations.  By  a  difference  of  coloring  and  engraving 
bills  of  the  different  denominations  are  now  readily  cogniz- 
able and  distinguishable,  and  this  is  all  that  is  required. 
In  respect  to  the  subsidiary  coins,  the  present  differences 
of  size  may  be  adhered  to  when  silver  is  changed  to  alumi- 
num, which  resembles  it  in  appearance  save  for  the  lack  of 
luster. 

Lastly,  it  is  claimed  in  favor  of  a  metallic  standard  that 
silver  and  gold  coins  may  be  reduced  to  bullion  substan- 
tially without  loss,  and  bullion  may  be  converted  into 
coins  substantially  without  expense.  In  this  way  it  is 
claimed  that  the  supply  of  money  may  be  regulated  and,  in 
fact,  tends  to  regulate  itself,  since  as  the  bullion  value  of 
these  metals  rises  coins  will  bo  melted  for  use  as  bullion, 
and  as  bullion  values  fall  the  metals  will  be  more  extens- 
ively coined.  But  under  a  system  of  current  credit-forms 
limited  to  the  expenses  of  the  government  and  fully  re- 
deemed in  receipt  of  its  income,  the  supply  of  money  will 
also  automatically  regulate  itself.  And  if  the  revenue  of 
the  government  be  confined  to  the  absorption  into  the  pub- 


226  BISOCIALISM— POLITICAL   ECONOMY 

lie  treasury  of  all  ground  values,  there  will  at  all  times  be 
a  definite  and  normal  relation  between  the  amount  of 
money  outstanding  and  the  volume  of  business  currently 
transacted  in  the  entire  country.  For  it  is  the  demands 
of  business  and  the  condition  of  trade  in  any  community 
which  determine  the  ground  values  of  that  community; 
and  when  these  ground  values  are  all  absorbed  in  taxes  and 
a  corresponding  amount  of  credit-forms  are  issued,  the 
same  relation  between  the  currency  and  current  business 
will  prevail  as  between  current  business  and  ground  val- 
ues. 

This  is  indeed  one  of  the  great  factors  in  the  economic 
demand  for  the  adoption  of  credit-forms  as  currency,  and 
the  economic  standard  as  the  standard  of  value.  Normal 
conditions  will  then  at  all  times  prevail  in  what  we  call 
the  money  market,  and  the  supply  of  money  will  always 
he  entirely  independent  of  the  manipulations  of  private 
persons  or  corporations.  Banks  will  be  relegated  to  their 
normal  functions  of  making  loans  and  exchanges  and  will 
cease  to  be  an  overshadowing  power  in  the  financial  polity 
of  the  nation.  The  issuing  of  bank  notes  to  circulate  as 
money  will  be  abolished  along  with  all  other  differential 
privileges  now  created  and  enforced  by  law.  The  bank- 
ing business  will  not  be  destroyed,  nor  its  normal  func- 
tions interfered  with,  but  rather  promoted.  For  in  pres- 
ent conditions  not  only  do  banks  have  differential  priv- 
ileges, but  these  privileges  are  of  greater  benefit  to  some 
banks  than  others — to  the  great  centralized  institutions 
rather  than  the  smaller  banks  away  from  the  money 
centers. 


OF  CURRENT  CREDIT-FORMS  227 

The  present  tendency  is  for  those  great  banking  institu- 
tions specially  favored  by  the  government  to  make  financial 
adjuncts  of  the  smaller  and  more  remote  banks,  and  to 
appropriate  unto  themselves,  as  it  were,  the  cream  of  all 
the  banking  business.  The  thing  that  will  be  most  advan- 
tageous to  the  ordinary  banker  is  a  return  by  all  bankers 
to  their  normal  functions  under  conditions  which  will 
bring  greater  prosperity  to  their  respective  communities  at 
large.  A  legitimate  banking  business  prospers  as  the  com- 
munity about  it  prospers,  and  not  otherwise.  The  pros- 
perity of  the  community  at  large,  in  normal  conditions,  is 
based  directly  upon  the  prosperity  of  its  marginal  pro- 
ducer. The  dailor,  not  the  dollar,  is  the  true  harbinger 
and  measure  of  his  prosperity.  The  current  credit-form 
is  the  only  medium  of  exchange  having  a  complete  eco- 
nomic basis. 


CHAPTER  III. 

OF   MONOPOLY  AND  FRANCHISE  VALUES. 

I  do  not  recognize  as  either  just  or  salutary  a  state  of 
society  in  which  there  is  any  "class"  which  is  not  labouring; 
any  human  beings  exempt  from  bearing  their  share  of  the 
necessary  labours  of  human  life,  except  those  unable  to  labour, 
or  who  have  fairly  earned  rest  by  previous  toil. 

John  Stuart  Mill. 

We  have  hitherto  sought,  as  far  as  possible,  to  limit  our 
discussion  of  values  to  those  values  which  have  their  origin 
in  normal  conditions.  By  normal  conditions  we  have  un- 
derstood those  conditions  which  attend  a  market  unaf- 
fected by  juridical  institutions,  laws,  or  customs.  We  now 
come  to  consider  values  as  they  appear  in  a  market  af- 
fected more  or  less  completely  by  such  institutions,  laws, 
and  customs.  This  leads  us  at  once  to  a  new  and  artificial 
element  in  the  origin  of  values — the  power  of  the  State 
to  create  and  maintain  differential  privileges  in  industry, 
exchange  and  land  tenure. 

A  Differential  Privilege  is  an  artificial  advantage  in  in- 
dustry, exchange,  or  land  tenure,  created  and  maintained 
directly  or  indirectly  by  the  State,  by  means  of  which  the 
possessor  may  acquire  and  retain  differential  net  value. 

From  the  earliest  times  governments  have  exercised  this 
power.  It  is  not  our  purpose  in  this  chapter  to  seek  to  jus- 
tify or  specially  to  condemn  such  action,  but  to  examine 

228 


MONOPOLY  AND  FRANCHISE  VALUES  229 

critically  the  effect  of  the  exercise  of  such  power  by  the 
State  iipon  values  in  various  circumstances. 

Net  value  lies  between  two  movable  points,  the  point  of 
positive  utility  and  the  point  of  exchange.  The  individual 
producer  may  increase  his  net  values  by  lowering  the  point 
of  positive  utility,  or  by  raising  the  point  of  exchange  as  to 
his  particular  labor-forms.  The  point  of  positive  utility 
may  be  lowered  in  such  manner  as  not  to  affect  either 
the  net  values  of  other  producers  or  the  net  salvage  of  any 
consumer.  Thus,  if  an  individual  producer  exhibits  un- 
usual ability  or  acquires  unusual  skill,  the  effect  may  be  an 
increase  of  net  value  to  himself  without  any  correspond- 
ing loss  or  detriment  to  another.  The  same  may  be  true, 
if  he  discovers  some  new  process,  or  invents  some  tool  or 
instrument  or  machine  for  use  in  his  enterprise.  In  all 
these  cases  he  may  enjoy  increased  net  value,  both  abso- 
lutely and  relatively,  until  the  ability,  skill,  process,  or 
instrument  of  production,  at  first  peculiar  to  himself,  shall 
become  commonly  used  by  his  fellows.  If  all  others  are  as 
free  as  himself  to  exhibit,  acquire,  discover,  invent  and  use 
such  ability,  skill,  process,  or  instrument,  his  superiority, 
while  it  lasts,  will  give  him  a  relative  advantage,  but  will 
ordinarily  not  increase  the  disutility,  industrial  or  com- 
mercial, of  any  person. 

On  the  other  hand,  if  the  possessor  of  such  advantage 
can,  by  law,  or  under  its  sanction,  prevent  other  producers 
from  using  a  like  advantage,  should  they  be  able  to  de- 
velop, discover,  or  otherwise  attain  the  same,  he  not  only 
can  increase  his  own  net  values,  but  can  prevent  the  in- 
crease of  the  net  values  of  his  competitors  in  so  far  as 


230  BISOCIALISM— POLITICAL   ECONOMY 

such  increase  is  dependent  upon  his  artificial  advantage. 
Under  the  law  of  the  market,  which  makes  market  price 
dependent  upon  the  marginal  pair,  the  price  of  the 
products  in  question  may  remain  unchanged,  and  he  alone 
may  possess  an  exclusive  advantage.  The  lowering  of  the 
point  of  exchange — the  falling  of  price — which  naturally 
follows  the  free  use  of  an  improved  method,  process  or 
instrument,  may  be  prevented,  and  thus  the  consumer  is 
deprived  of  the  advantage  of  lower  cost.  It  is  a  necessary 
result  of  any  such  artificial  advantage  in  production  that 
all  other  producers  and  all  consumers  are  barred  from 
enjoying  benefits  which,  in  normal  conditions,  would  arise 
from  lessened  disvalue  on  the  one  hand,  and  lessened  cost 
on  the  other.  All  consumers  are  deprived  of  the  benefits 
of  the  normal  socialization  of  utility. 

As  already  indicated,  differential  privileges  may  exist  in 
industry,  in  exchange,  and  in  land  tenure.  A  man  may  se- 
cure an  exclusive  privilege  for  the  use  or  control  of  a  cer- 
tain process,  or  of  a  certain  tool  or  machine  used  in  man- 
ufacture; or  he  may  secure  an  exclusive  trading  privilege 
at  a  certain  place  or  in  a  certain  line  of  trade-forms;  or, 
finally  and  most  important  of  all,  he  may  secure  the  ex- 
clusive use  in  industry  or  exchange,  or  both,  of  superior 
land-forms. 

Differential  privileges  may  be  granted  with  the  avowed 
purpose  of  giving  the  possessor  an  artificial  economic  ad- 
vantage, or  they  may  be  granted  immediately  and  ostensi- 
bly for  some  purpose  supposably  politic  in  its  nature,  the 
economic  advantage  being  looked  upon  as  merely  inci- 
dental.    The  former  may  be  called  direct,  and  the  latter 


MONOPOLY  AND  FRANCHISE  VALUES     231 

indirect  differential  privileges.  A  patent  right,  so-called, 
is  an  example  of  direct  privilege;  while  a  protective  tariff 
furnishes  many  instances  of  indirect  differential  privileges. 

The  most  important  distinction  in  differential  privileges 
arises  from  the  fact  that  in  most  cases  full  and  free  com- 
petition among  individuals  would  be  possible  but  for  the 
action  of  the  State  in  creating  the  privilege;  while  in  a 
few  cases  natural  causes  intervene  to  prevent  such  com- 
petition among  individuals  prior  to  any  act  of  the  State 
and  irrespective  of  such  action.  For  instance,  in  manufac- 
ture, all  men,  in  the  absence  of  patent  laws  or  other  re- 
strictions, can  fully  and  freely  compete  in  the  use  of  all 
processes  and  of  all  machinery;  or,  in  exchange,  in  the 
absence  of  tariff  or  other  restrictive  laws,  all  men  can  fully 
and  freely  compete  in  the  market.  But  in  such  businesses 
as  the  operation  of  steam  and  street  railways,  the  distribu- 
tion of  consumers  of  water,  gas,  electricity,  and  other  so- 
called  "public  utilities,"  full  and  free  competition  is  im- 
possible from  natural  causes.  But  one  railroad  can  ordi- 
narily be  constructed  upon  the  shortest  and  best  line  be- 
tween two  cities;  and  even  if  two  railroads  are  parallel 
throughout  their  entire  length,  the  competition  is  practi- 
cally limited  to  these  two  roads,  and  may  be  entirely  elim- 
inated by  agreements  for  pooling.  In  the  same  way  full 
and  free  competition  is  impossible  in  the  use  of  city  streets 
for  street  railways,  water  mains,  gas  mains,  light,  power, 
telegraph,  and  telephone  systems. 

It  is  true  that  it  is  physically  possible  for  two  or  even 
more  competing  companies  to  use  a  given  street  for  some 
or  all  of  the  foregoing  purposes;  but  this  does  not  alter 


•?33  BISOCIALISM— POLITICAL  ECONOMY 

the  fact  that  every  such  business  involves  a  differential 
privilege.  Tlio  benefits  of  the  privilege  in  any  such  case 
are  divided  between  the  competing  companies,  and  it  is  sel- 
dom, indeed,  that  the  competition  is  strong  enough  and 
persistent, enough  to  benefit  the  public  for  any  consider- 
able time.  With  two  companies  in  the  field  there  is  prac- 
tically no  danger  of  competition  from  a  third,  and  the  two 
find  it  to  their  advantage  to  pool  their  interests  and  to 
unite  against  further  competition  rather  than  to  compete 
between  themselves.  This  is  not  true  of  the  grocery  busi- 
ness, the  dry  goods,  hardware,  or  jewelry  business,  and  the 
like;  nor  is  it  true  of  any  manufacturing  enterprise  in 
normal  conditions.  These  are  all  open  to  full  and  free 
competition ;  among  them  pooling  is  practically  impos- 
sible. 

There  is  another  distinction,  however,  which  more  fully 
differentiates  those  businesses  which  are  normally  open  to 
full  and  free  competition  from  those  which  are  not.  In 
the  grocery  business,  for  instance,  it  is  not  necessary  for 
the  proprietor  to  make  private  use  of  public  property  or 
to  invoke  the  exercise  of  any  public  power.  He  owns  the 
land-form  upon  which  his  store  is  located  or  rents  it  from 
a  private  owner,  and  the  same  is  true  of  his  store  build- 
ing. But  a  street  railway  company,  a  private  water,  gas, 
electric  light,  or  telephone  company  makes  use  of  the  pub- 
lic streets  in  a  manner  not  open  to  the  general  public.  In 
order  to  do  this  they  are  required  by  law  to  secure  spe- 
cial grants  of  privilege  from  city  and  village  councils  in 
the  form  of  franchises. 

In   addition    to   this   private   use  of   public   property, 


MONOPOLY  AND  FRANCHISE  VALUES      233 

these  companies  usually  have  granted  to  them  by  law  the 
right  of  eminent  domain,  or  the  power,  through  the  ju- 
dicial machinery  of  tlio  State,  of  condemning  private  prop- 
erty for  use  in  their  businesses  when  necessary.  This  is 
especially  true  of  steam  and  street  railway  companies.  In 
the  authority  to  invoke  and  use  the  right  of  eminent  do- 
main these  companies  have  delegated  to  them  a  part  of  the 
sovereign  power  of  the  State,  and  in  condemning  private 
property  they  exercise  what  is  properly  a  public  function. 

In  addition  to  these  distinguishing  characteristics,  the 
business  carried  on  in  an  enterprise  which  requires  the 
grant  of  a  franchise  by  public  authority  is  itself  of  a  pub- 
lic nature.  The  corporations  which  engage  in  such  enter- 
prises are  frequently  termed  quasi-public  corporations. 
They  are  also  known  as  public  service  corporations.  The 
State  maintains  the  right  to  regulate  them  in  a  special 
manner.  In  the  case  of  steam  railways,  congress  has  power 
to  regulate  freight  charges  in  all  cases  of  inter-state  com- 
merce, and  the  several  states  regulate  fares  and  freight 
charges  within  their  respective  limits.  It  is  now  conceded 
that  cities  may,  within  reasonable  limits,  regulate  the  fares 
charged  by  street  railway  companies,  the  prices  charged 
by  gas  companies  for  their  product  and,  in  a  general  way, 
by  all  persons  or  companies  who  operate  public  utilities. 

A  Public  Utility  is  an  industrial  enterprise  which  neces- 
sitates the  special  use  of  public  land-forms  or  the  acquisi- 
tion and  use  of  private  land-forms  under  the  special  power 
of  eminent  domain,  or  both,  in  supplying  some  product  or 
service  generally  desired  by  the  people. 

In  present  conditions  the   differential   privileges  con- 


234  BISOCIALISM— POLITICAL   ECONOMY 

ferred  by  public  authority  are  of  two  kinds:  monopolies 
and  public  utility  franchises.  The  term  franchise  has  so 
many  different  applications  that  it  is  necessary  to  limit 
it  in  this  discussion  by  placing  before  it  the  words  public 
utility.  This  is  to  be  regretted,  especially  as  it  compels 
us  to  adopt  a  still  longer  phrase  in  speaking  of  public 
utility  franchise  values.  But,  unlike  many  lengthy  terms, 
these  phrases  do  not  tend  to  obscure  the  subject.  They  are 
easily  understood  and  are  capable  of  accurate  definition. 
Simplicity  and  accuracy  are  the  first  requisites  in  the 
elaboration  of  any  science. 

A  Monopoly  is  a  differential  privilege  exercised  or  en- 
joyed in  connection  with  some  private  enterprise  which,  in 
normal  conditions,  is  open  to  full  and  free  competition 
among  individuals. 

A  Public  Utility  FrancMse  is  a  differential  privilege  ex- 
ercised or  enjoyed  in  connection  with  some  private  enter- 
prise which,  in  normal  conditions,  is  not  open  to  full  and 
free  competition  among  individuals,  but  requires  the  pri- 
vate use  of  public  property  or  the  private  exercise  of  a 
public  function,  or  both,  to  make  such  enterprise  effective 
in  private  hands. 

These  definitions  lead  to  simple  distinctions  as  to  mo- 
nopoly and  public  utility  franchise  values. 

Monopoly  Values  are  differential  net  values  acquired 
and  retained  by  means  of  monopolies. 

Public  Utility  Franchise  Values  are  differential  net  val- 
ues acquired  and  retained  by  means  of  public  utility 
franchises. 

In  the  remainder  of  tliis  discussion  the  term  franchise 


MONOPOLY  AND  FRANCHISE  VALUES     235 

is  used  only  in  the  sense  of  public  utility  franchise  as  above 
defined. 

Franchise  values  are  related  upon  the  one  hand  to  land 
values,  and  upon  the  other  hand  to  monopoly  values.  Like 
land  values  they  involve  the  use  of  superior  land-forms 
under  the  sanction  of  the  State;  but  land  values  arise  un- 
der a  general  form  of  land  tenure  applying  to  the  use  of 
land-forms  under  fee  simple  titles  in  enterprises  fully  open 
to  competition ;  while  franchise  values  arise  under  a  special 
form  of  land  tenure  limited  to  non-competitive  enterprises 
only. 

A  farmer  or  a  merchant  occupies  a  land-form  under  a 
general  tenure  which  applies  alike  to  all  persons  occupy- 
ing land-forms  for  the  same  or  for  any  normally  com- 
petitive purpose ;  while  a  railroad  company  occupies  a  con- 
tinuous strip  of  land-forms  under  a  special  tenure  carry- 
ing with  it  the  extraordinary  power  of  eminent  domain, 
and  uses  such  strip  for  a  purpose  normally  non-competi- 
tive. When  the  possessor  of  a  franchise  appropriates  for 
special  use  land-forms  hitherto  devoted  to  public  instead 
of  private  uses  (as  a  public  street)  he  does  not  exercise 
the  right  of  eminent  domain,  but  he  always  engages  in  a 
normally  non-competitive  enterprise.  The  latter  is  the 
distinguishing  characteristic. 

In  a  former  chapter  we  have  seen  that  if  the  State 
should  appropriate  by  way  of  taxation — or  more  properly 
speaking,  in  lieu  of  taxation — the  entire  ground  value  of 
all  land-forms  each  year,  the  owner's  investment  in  a  given 
land-form,  irrespective  of  improvements,  would  be  but  the 
present  worth  of  one  year's  ground  rent ;  and  upon  this  in- 


236  BISOCIALISM— POUTICAL  ECONOMY 

vestment  he  would  make  a  percentage  equal  to  the  current 
rate  of  interest  upon  secure  investments,  and  nothing 
more.  He  could  not  hold  his  land-form  at  20  years'  pur- 
chase instead  of  one,  and  secure  an  income  based  on  such 
increased  valuation.  Land-forms  would  increase  in  value 
as  the  economic  margin  receded,  but  of  this  increase  the 
owner  could  appropriate  but  a  small  part  (a  percentage 
equal  to  that  expressed  by  the  current  rate  of  interest),  the 
remainder  going  to  the  State  in  increased  ground  value. 
Land-forms  would  then  have  neither  speculative  nor  mo- 
nopoly values,  and  the  income  of  an  investment  at  true 
values  would  be  the  economic  equivalent  of  the  income  to 
pure  capital  invested  in  productive  enterprises  at  the  cur- 
rent rate  of  interest.  Millions  of  dollars  now  invested  in 
monopoly  and  speculative  land  values  would  be  diverted  to 
productive  uses,  to  the  great  encouragement  and  increase 
of  industry  and  exchange. 

Essentially  the  same  thing  is  true  in  the  case  of  land- 
forms  used  under  a  franchise  for  a  special  purpose.  The 
income  of  such  an  enterprise,  in  so  far  as  it  is  dependent 
upon  the  special  use  of  the  land-form,  is  a  species  of  mo- 
nopolized ground  rent.  The  value  of  the  franchise  as  dis- 
tinguished from  the  value  of  the  plant  itself — i.  e.,  the 
personal  property,  so-called,  of  the  concern — is  a  species  of 
monopolized  ground  value.  If  the  franchise  value  is  re- 
tained by  the  franchise  owner,  it  accumulates  in  selling 
price  after  the  manner  of  land  value;  while  if  the  fran- 
chise were  taxed  at  100  per  cent  of  its  selling  value,  this 
value  would  be  the  present  worth  of  one  years  income  from 
the  special  use  of  the  land-forms  involved.     The  net  in- 


MONOPOLY  AND  FRANCHISE  VALUES  237 

come  of  the  franchise  as  such  would  then  be  equivalent  to 
the  interest  upon  an  amount  of  pure  capital  equal  to  the 
selling  value  of  the  franchise  at  one  year's  purchase.  In 
such  circumstances  money  invested  in  an  enterprise  using 
a  franchise  would  pay  but  the  current  rate  of  interest,  or 
its  economic  equivalent.  The  value  of  the  differential 
privilege,  aside  from  this  current  return,  would  be  ab- 
sorbed annually  by  the  State  which  granted  the  franchise. 
If  both  land  values  and  franchise  values  were  taxed  at  100 
per  cent  of  their  selling  values,  the  State  would  absorb  all 
differential  values  which  result  from  the  use  of  superior 
land-forms  over  and  above  the  equivalent  of  the  return  to 
pure  capital,  and  land  values  and  franchise  values  would 
yield  "unto  Caesar  that  which  is  Caesar's,"  and  unto  the 
producer  that  which  is  distinctively  his. 

Although  economically  distinct,  monopolies  and  fran- 
chises are  closely  related.  Indeed,  they  are  frequently 
joined,  and  the  one  is  made  to  support  the  other  in  a 
given  business  enterprise.  A  street  railway  company  may 
be  possessed  of  a  franchise  as  to  its  use  of  public  streets 
and  of  one  or  more  monopolies  with  reference  to  its  roll- 
ing stock  and  motive  power.  The  same  person,  firm,  or 
corporation,  may  possess  a  monopoly  in  industry,  as  a  pat- 
ent; a  monopoly  in  exchange,  by  being  the  beneficiary  of 
a  tariff  law;  and  a  monopoly  in  land  tenure  through  the 
exclusive  ownership  of  a  land-form  furnishing  natural 
water  power.  To  these  holdings  may  also  be  added,  in  the 
hands  of  a  single  person,  or  concern,  a  franchise  in  the 
matter  of  transportation,  or  of  furnishing  heat,  light,  and 
power  by  means  of  electricity  to  the  people  of  a  great  cit}-. 


238  BISOCIALISM— POLITICAL   ECONOMY 

x\ll  of  these  monopolies  and  franchises  are  dependent  upon 
the  State  for  their  existence  and  enforcement  in  private 
hands. 

Just  as  there  is  an  evolution  in  the  development  of  the 
normal  market,  so  there  is  an  evolution  in  the  develop- 
ment of  monopolies  in  an  abnormal  market.  First,  there 
arises  the  simply  monopoly,  limited  in  extent  and  unre- 
lated to  any  franchise;  then  follows  an  extension  of  the 
scope  and  application  of  the  simply  monopoly;  then  the 
franchise  is  developed  as  an  adjunct  to  simple  monopoly, 
rendering  the  economic  situation  complex;  then  follows 
the  establishment,  in  primitive  form,  of  monopolies  and 
franchises  united  under  one  management  for  the  purpose 
of  controlling  the  differential  values  of  a  given  trade-form 
in  an  extensive  local  or  even  a  national  market;  and 
finally  these  compound  or  trust  monopolies  are  extended 
in  scope  and  application  until  they  seek  to  affect  and  con- 
trol the  differential  net  values  of  a  given  trade-form  or 
class  of  trade-forms  in  the  markets  of  the  world.  This 
evolution  is  epitomized  in  the  following  definitions : 

A  Simple  Monopoly  is  a  single  monopoly  unrelated  to 
a  franchise. 

A  Complex  Monopoly  is  a  monopoly  coupled  with  a 
franchise. 

A  Compound  or  Trust  Monopoly  is  a  combination  of 
monopolies,  simple  or  complex,  under  one  management, 
for  the  purpose  of  controlling  differential  values  as  to  a 
given  trade-form,  or  class  of  trade-forms,  in  a  general  or 
universal  market. 

In  a  former  chapter  we  learned  that  when  land-forms 


MONOPOLY  AND  FRANCHISE  VALUES     239 

upon  the  normal  margin  are  monopolized  and  held  out  of 
use,  the  result  is  to  force  the  marginal  producers  to  a  lower 
level  and  so  reduce  the  amount  of  the  marginal  return. 
Not  only  this,  but  such  withholding  of  the  normally  mar- 
ginal land-forms  from  use  increases  the  ground  rent  and 
also  the  ground  value  of  all  land-forms  above  the  margin. 
This  makes  it  more  and  more  difficult  to  acquire  land- 
forms  for  use  either  in  production  or  for  residence  pur- 
poses, and  compels  a  greater  number  of  people  to  resort 
to  an  already  artificially  depressed  economic  margin. 

In  like  manner  a  monopoly  in  any  of  the  processes  of 
industry  or  exchange  does  not  expend  all  of  its  baleful  ef- 
fects upon  those  who  are  directly  superseded  or  injuriously 
affected  by  it.  The  people  who  are  displaced  from  their 
normal  callings  by  the  existence  of  monopolies  in  the 
hands  of  a  few  persons  in  a  given  field,  seek  to  find  busi- 
ness opportunities  or  employment  in  some  other  vocation 
where  monopolies  do  not  exist.  This  tends  to  overcrowd 
these  latter  callings  and  thereby  unnaturally  to  reduce  the 
net  values  to  be  obtained  therein. 

As  the  divergence  between  the  returns  of  monopolies  and 
of  ordinary  occupations  becomes  more  and  more  apparent, 
a  greater  number  of  people  seek  the  advantages  of  differ- 
ential privilege?,  and  monopolies  tend  to  multiply.  Tliis 
still  further  accentuates  the  divergence  between  the  favored 
and  the  unfavored,  and  still  further  accelerates  the  piling 
up  of  unearned  net  values  in  the  hands  of  the  few  upon 
the  one  hand  and,  upon  the  other  hand,  the  reduction  of 
the  wages  of.  the  many  to  a  minimum  which  will  barely 
sustain  life  andlnecessary  bodily  strength.     Simple  mo- 


24U  BISOCIALISM— POLITICAL   ECONOMY 

nopolies  become  complex  and  the  evil  results  are  increased 
accordingly.  And  when  trust  monopoly  after  trust  mo- 
nopoly is  formed,  the  crowding  in  the  occupations  not  fa- 
vored by  law  becomes  so  great  that  all  labor  values  are 
forced  below  the  normal  return  to  labor-power,  and  all  cap- 
ital values  become  less  than  the  marginal  return  to  pure 
capital.  An  unnatural  and  unnecessary  strife  arises  be- 
tween employers  and  their  employes  even  where  no  mo- 
nopoly is  enjoyed  by  the  former.  All  consumers  suffer 
from  prices  rendered  artificially  high,  while  those  who 
produce  receive  wages  which  are  artificially  low.  All  such 
conditions  are  abnormal  and  unnecessary  and  should  be 
abolished. 

It  is  at  this  point  that  standard  Political  Economy  comes 
to  the  rescue  of  the  established  order.  It  teaches  that  the 
evils  which  we  have  described  are  natural  and  necessary 
evils,  and  that  they  would  continue  to  exist,  if  all  mo- 
nopolies were  abolished  and  the  best  of  economic  condi- 
tions were  established  among  men.  They  maintain  that 
the  fecundity  of  the  human  race  is  so  great  that  popula- 
tion constantly  tends  to  press  upon  subsistence,  and  that 
the  inevitable  result  must  be  a  struggle  for  existence  in 
which  the  fittest  shall  survive.  But  even  if  this  ghastly 
conception  of  Infinite  Goodness  were  true,  should  not  all 
men  have  equal  opportunity  to-  survive?  Shall  not  the 
State,  which  assumes  to  protect  the  weak  against  the 
strong,  the  property  owner  against  the  thief,  after  pro- 
duction is  completed,  also  assume  to  protect  the  weak 
against  the  strong,  the  honest  toiler  against  the  exploiter 
of  his  labor-power  in  the  process  of  production?    Assum- 


MONOPOLY  AND  FRANCHISE  VALUES  241 

ing  that  the  opportunities  of  nature  are  not  sufficient  for 
the  sustenance  of  the  race,  shall  the  State  parcel  out  to  the 
few  such  opportunities  as  exist?  Does  not  the  general  in 
a  beleaguered  city  dole  out  the  scant  rations  with  an  im- 
partial hand? 

As  long  as  some  men  roll  in  the  lap  of  luxury  through 
the  differential  privileges  of  the  law,  let  not  Political 
Economy  malign  the  Most  High. 

In  the  United  States  at  the  present  time  there  is  a  cor- 
poration engaged  in  the  manufacture  and  sale  of  kerosene 
oil  and  other  products  of  petroleum.  It  employs  thou- 
sands of  men,  uses  both  auxiliary  and  pure  capital-forms 
in  large  measure,  is  possessed  of  monopolies  in  the  proc- 
esses of  manufacture,  owns  or  controls  nearly  all  of  the 
principal  oil  fields  of  the  continent,  controls  transporta- 
tion of  its  own  and  like  products  over  railways  through  a 
s.ystem  of  rebates,  and  has  numerous  and  valuable  fran- 
chises for  pipe  lines,  one  of  which  extends  from  its  prin- 
cipal oil  fields  to  the  Atlantic  seaboard.  In  its  products 
appear  net  values  of  all  possible  kinds — labor  values, 
capital  values,  land  values,  monopoly  values  and  franchise 
values,  all  of  which  we  have  heretofore  defined.  What 
chance  has  the  ordinary  producer  of  oil  and  kindred  prod- 
ucts in  competition  with  this  gigantic  beneficiary  of  all 
forms  of  privilege? 

We  have  already  discussed  labor  values  and  capital  val- 
ues, and  have  shown  the  relation  in  which  they  stand  to 
each  other,  and  in  which  both  stand  to  land  values.  From 
what  has  been  said  it  may  be  seen  that  monopoly  and 
franchise  values  are  essentially  different  from  labor  val- 


242  BISOCIALISM— POLITICAL   ECONOMY 

ues  and  capital  values.  The  latter  two  are  based  directly 
upon  labor-power,  do  not  depend  upon  the  power  or  favor 
of  the  State  for  their  creation,  and  can  be  traced  to  the 
labor-power  of  particular  individuals ;  while  both  franchise 
and  monopoly  values  are  based  directly  upon  the  power 
of  the  State  in  granting  and  maintaining  differential 
privileges,  and  can  not  be  traced  to  the  labor-power  of  any 
particular  individual  or  individuals. 

Wliile  monopoly  and  franchise  values  differ  essentially 
from  labor  values  and  capital  values,  they  also,  in  many 
respects,  differ  from  each  other.  Monopoly  values  would 
not  arise  at  all,  were  it  not  for  the  action  of  the  State  in 
creating  them.  On  the  other  hand,  franchise  values,  like 
land  values,  would  arise  without  any  positive  action  by  the 
State. 

The  restriction  placed  by  nature  upon  the  use  of  su- 
|>erior  land-forms  exists  independently  of  the  State,  but 
the  State  can  not  exist  without  exercising  some  sort  of  con- 
trol over  the  land-forms  within  its  limits.  The  State  has 
to  do  with  territory  as  well  as  with  people;  and  while  it 
does  not  create  either  land-forms  or  land  values,  it  controls 
the  tenure  of  the  one  and  the  distribution  of  the  other.  If 
land-forms  are  used  under  any  organized  and  orderly  sys- 
tem of  industry  and  exchange,  the  State  must  establish 
and  maintain  some  form  of  land  tenure ;  and  if  enterprises 
not  in  themselves  fully  open  to  competition  are  left  in 
private  hands,  the  State  must  grant  and  maintain  fran- 
chises. But  the  special  value  of  all  franchises  may  be 
appropriated  by  the  public  in  taxation  or  by  the  terms  of 
the  franchise.    Under  a  competitive  system  in  which  pub- 


MONOPOLY  AND  FRANCHISE  VALUES     343 

lie  utilities  are  not  directly  socialized  by  public  ownership 
and  operation  there  is  an  economic  reason  for  the  crea- 
tion of  a  franchise — a  differential  privilege,  at  least  in 
form,  in  a  business  naturally  non-competitive;  but  there 
is  no  economic  reason  or  excuse  whatever  for  the  creation 
of  a  monopoly — a  differential  privilege  in  a  fully  competi- 
tive business. 

In  this  connection  it  should  be  borne  in  mind  that  the 
point  of  exchange  measures  not  only  value  to  the  seller, 
but  cost  to  the  buyer.  Therefore  a  rise  in  price,  or  the 
artificial  maintenance  of  price  above  the  point  incident  to 
the  normal  market,  can  not  increase  the  net  value  of  a 
producer  or  seller  without  at  the  same  time  correspond- 
ingly increasing  the  cost  to  some  buyer  or  consumer.  Con- 
sequently there  is  no  possibility  of  any  general  or  aggre- 
gate economic  gain  in  the  enactment  of  any  law  creating 
or  maintaining  a  monopoly.  The  statesman  must  look 
wholly  to  politics  for  justification  when  he  proposes  to 
create  or  maintain  monopoly  values  of  any  kind  or  char- 
acter; and  he  must  first  demonstrate  that  anything  can  bo 
politic  which  is  not  at  the  same  time  economic. 

Under  the  assumption  that  enterprises  which  require 
franchises  are  to  l^e  left  in  private  hands,  we  have  sho^^■u 
the  relation  of  franchise  values  to  land  values,  and  the 
effect  of  a  distinctive  tax  upon  franchise  values.  There 
is  another  view  of  this  question,  however,  which  still  more 
clearly  identifies  franchise  values  with  land  values,  and 
which  shows  that  by  a  simple  process  the  former  may  be 
transformed  into  the  latter. 

"We  have  already  shown,  by  way  of  illustration,  that  if 


244  BISOCIALISM— POLITICAL   ECONOMY 

natural  gas  should  be  distributed  by  any  city  to  its  citi- 
zens at  cost,  in  lieu  of  the  distribution  of  artificial  gas  by 
a  private  company  at  a  higher  price,  the  saving  in  the  cost 
of  gas  would  be  offset  by  a  rise  in  ground  rents.  If  now 
the  same  city  should  furnish  this  natural  gas  absolutely 
free  to  its  citizens,  bearing  the  cost  of  distribution  itself, 
the  result  would  be  a  still  greater  increase  in  ground  rent, 
and  consequently  of  the  ground  value,  or  selling  price,  of 
building  lots.  If,  however,  the  city  should  increase  its 
taxes  upon  building  lots,  irrespective  of  improvements, 
i.  e.,  upon  bare  ground  values,  to  such  an  extent  as  to 
absorb  into  the  public  treasury  this  increase  in  ground 
value,  the  amount  of  its  revenues  would  be  substantially 
the  same  as  if  it  collected  the  cost  of  distribution  from 
each  user  of  gas  and  allowed  its  tax  rate  to  remain  as  be- 
fore. The  matter  of  collection  of  this  revenue  would  be 
greatly  simplified,  however,  by  the  plan  of  furnishing  free 
gas  and  raising  the  tax  rate  on  ground  values. 

The  same  principle  applies  in  case  of  any  so-called  pub- 
lic utility.  Any  city  having  a  municipal  water  plant 
could  abolish  all  water  rates  and  collect  the  cost  of  the 
distribution  of  water  by  means  of  appropriating  in  in- 
creased taxes  that  ground  value  which  would  result  as  cer- 
tainly as  the  sun  would  continue  to  shine.  A  city  owning 
and  operating  its  own  street  railways  could  give  free 
transportation  and  collect  the  cost  in  taxes  upon  increased 
ground  values.  For  if  transportation  were  free,  rents  in 
the  residence  districts  would  rise  until  the  saving  in  car 
fares  was  wholly  absorbed,  and  ground  values  would  rise 
accordingly.     The  State  instead  of  private  owners  could 


MONOPOLY   AND  FRANCHISE   VALUES  245 

then  appropriate  the  increase.  This  principle  can  be  ex- 
tended to  include  free  transportation  upon  steam  railroads 
owned  and  operated  by  the  State ;  it  points  to  the  ultimate 
municipalization,  with  free  use  to  the  citizen,  of  all  public 
utilities. 

Attention  is  again  called  to  the  fact  that  free  gas,  free 
water,  free  transportation  and  the  like,  while  increasing 
the  value  of  superior  land-forms,  would  not  increase  the 
value  of  labor- forms,  either  as  satisforms  or  capital-forms, 
in  the  least  degree.  Indeed,  such  free  utilities  would  tend 
to  increase  the  production  of  all  labor-forms,  and  so 
cheapen  them.  The  importance  of  this  distinction  between 
the  effects  of  cheaper  public  utilities  upon  land  values  and 
labor  values,  respectively,  will  be  seen  in  the  next  chap- 
ter. 


CHAPTER  IV. 

OF  THE   SOCIAUZATION   OF  VALUES. 

A  land  tax  levied  in  proportion  to  the  rent  of  land  •  •  • 
will  fall  wholly  on  the  landlords.  David  Ricardo. 

A  tax  on  rent  falls  wholly  on  the  landlord.  There  are  no 
means  by  which  he  can  shift  the  burden  upon  any  one  else. 

John  Stuart  Mill. 

We  have  so  far  confined  our  discussion  of  the  distribu- 
tion of  values  to  distribution  among  individuals,  the  share 
taken  by  the  State  for  revenue  having  been  mentioned  only 
incidentally.  The  question  of  the  socialization  of  values — 
commonly  discussed  under  the  head  of  taxation — has  long 
been  recognized  as  one  of  great  importance.  Political  bat- 
tles have  waged  about  this  question  for  centuries,  and 
many  wars  and  insurrections  have  risen  from  it,  both  di- 
rectly and  indirectly.  The  subject  stands  foremost  in  im- 
portance to-day  with  reference  to  the  relation  of  every 
government  to  the  property  of  its  citizens.  Political 
economists  are  at  sea  about  it ;  statesmen  are  at  odds  about 
it ;  politicians  make  a  great  ado  about  it,  not  knowing  or 
caring  much  one  way  or  the  other;  while  the  people  in 
general  who  pay  the  taxes  feel,  rather  than  know,  that 
there  is  something  radically  wrong  about  it  in  present  co]i- 
ditions.  Just  now  there  is  a  growing  tendency  in  certain 
quarters  to  turn  the  whole  matter  over  to  a  board  or  com- 
mission of  "experts,"  which  is  the  worst  thing  that  could 
be  done.     This  matter  of  the  socialization  of  values  about 

246 


OF  THE  SOCIALIZATION  OF  VALUES  247 

which  there  is  so  much  confusion  is  really  one  of  the  sim- 
plest things  in  the  world.  Any  ordinary  man  can  under- 
stand it,  any  set  of  ordinary  men  can  correctly  apply  it 
to  a  whole  nation.  It  is  necessary  simply  to  get  away  from 
the  dogmatic  statements  and  statistical  jumbles  of  the  ex- 
perts, and  to  return  to  simple  first  principles  in  order  to 
solve  this  vexing  problem. 

Man  may  satisfy  his  desires  as  an  isolated  individual  by 
his  own  unaided  efforts,  or  he  may  unite  with  his  fellows 
in  the  expenditure  of  eifort  for  the  attainment  of  benefits 
which  are  reciprocal.  This  union  of  effort  for  reciprocal 
benefit  may  be  exerted  under  two  forms,  cooperation  in 
industry  and  competition  in  exchange.  Both  forms  are 
now  in  vogue,  subject  to  the  artificial  interference  of  mo- 
nopolies and  franchises  which  tend  to  destroy  their  recipro- 
cal features. 

For  the  sake  of  convenience,  let  us  consider  the  case 
of  a  people  having  diversified  industries  and  maintaining 
a  general  market  in  which  is  determined  the  current  prices 
of  all  their  products.  From  the  association  of  these  people 
in  industry  and  exchange  there  arise  certain  utilities  which 
can  be  acquired  in  no  other  way.  Some  of  these  utilities 
are  capable  of  measurement  in  the  market  by  means  of 
exchange;  others  are  immeasurable.  All  the  measurable 
utilities  are  manifested  in  the  form  of  values  or  their 
economic  equivalents  in  net  salvage.  These  values,  con- 
sidered with  reference  to  their  origin,  in  conditions  un- 
affected by  juridical  laws,  are  of  three  kinds :  labor  values, 
capital  values  and  land  values;  in  conditions  affected  by 
juridical  laws   there  are  also   franchise  values  and  mo- 


248  BISOCIAUSM— POLITICAL   ECONOMY 

nopoly  values,  although  the  latter  are  wholly  artificial 
and  do  not  necessarily  arise  from  the  existence  of  the 
State.  We  shall  now  consider  each  of  these  values  with 
reference  to  the  advisability  and  the  possibility  of  its  so- 
cialization. 

In  the  community  which  we  are  considering  a  man  cre- 
ates a  certain  labor-form,  and  takes  it  to  the  market  for 
exchange.  He  finds  the  price  of  similar  labor-forms  fixed 
in  advance  of  his  coming,  and  he  must  sell,  if  at  all,  at 
the  market  price.  This  price  is  determined  by  the  mar- 
ginal buyers  and  sellers  of  such  labor-forms  in  that 
market,  and  the  tendency  in  a  general  unrestricted  market 
is  toward  lowness  of  price.  The  larger  the  community 
the  lower  the  price  of  labor-forms  is  likely  to  be.  Associa- 
tion with  his  fellows  has  furnished  each  man  with  a  fine 
opportunity  to  satisfy  his  desire  for  one  labor-form  by  the 
creation  and  sale  of  another.  In  the  course  of  the  whole 
transaction  he  is  enabled  to  satisfy  his  desires  with  the 
least  possible  disutility,  the  size  of  the  market  benefiting 
him  as  a  buyer  of  other  labor-forms,  making  up  in  not 
salvage  his  decrease  in  net  value.  But  the  fact  remains 
that,  as  a  seller,  the  market  is  against  him,  if  only  the 
value  of  his  own  labor-form  is  considered. 

There  is  not  a  particle  of  the  value  of  a  labor-form  to 
which  the  seller  can  point  and  say  that  the  community, 
independent  of  the  body  politic  called  the  State,  has  dis- 
tinctively created  or  increased  it.  Nor  can  the  State  itself 
as  a  body  politic  lay  claim  to  the  distinctive  creation  or 
increase  of  any  particle  of  such  value.  What  has  the 
State,  as  such,  done  with  reference  to  this  labor-form? 


OF  THE  SOCIALIZATION  OF  VALUES  249 

Say  you  that  it  has  educated  the  producer  in  his  youth 
and  protected  him  and  his  property  in  his  manhood,  and 
60  made  it  possible  for  him  to  create  and  exchange  his 
labor- form  with  the  least  possible  disutility?  Very  well. 
It  does  this  for  all  its  citizens,  and  the  result,  as  we  have 
seen  in  a  former  chapter,  is  that  in  any  country  where 
education  is  fostered  and  property  well  protected  the 
market  price  of  labor-forms  is  correspondingly  low,  and 
market  price  is  the  measure  of  value,  expressed  in  terms 
of  money.  All  of  the  benefits  of  government  are  mani- 
fested, not  in  the  value  of  labor-forms,  but  in  their  cheap- 
ness. 

We  have  been  so  prone,  under  the  teachings  of  current 
Political  Economy,  to  look  upon  the  creation  of  values  as 
the  great  desideratum  of  production  that  we  are  shocked 
to  find  that  the  government  is  constantly  lending  its  aid  to 
the  cheapening  of  all  labor  products,  individually  con- 
sidered. In  the  aggregate,  of  course,  with  reference  to 
quantity,  the  production  of  labor-forms  is  vastly  increased 
by  good  government.  But  with  reference  to  labor  values, 
a  given  quantity  of  product  being  considered,  the  rule  is 
universal  that  the  larger  the  market  and  the  better  the 
government,  the  lower  the  values  of  labor-forms  as  ex- 
pressed in  price.  The  benefits  of  civilization  with  refer- 
ence to  labor-forms  are  either  immeasurable  or  are  mani- 
fested in  net  salvage. 

The  same  is  true  with  reference  to  all  capital  values. 
We  have  shown  the  intimate  relation  between  labor  values 
and  capital  values,  and  have  demonstrated  the  fact  that 
in   normal  conditions  these  values  are  affected  alike  by 


250  BISOCIALISM— POLITICAL   ECONOMY 

given  phenomena,  and  that  they  tend  to  rise  and  fall  to- 
gether and  from  the  same  causes.  Auxiliary  capital-forms 
are  subject  to  the  same  laws  of  the  market  as  labor-forms, 
and  the  rate  of  interest  with  respect  to  pure  capital-forms 
is  determined  by  its  marginal  users,  who  also  tend  to  be 
the  marginal  producers  of  labor-forms.  The  larger  the 
community  and  the  better  the  government,  the  lower  the 
current  rate  of  interest  in  normal  conditions.  And  since 
good  government  tends  to  diminish  all  labor  values  and 
capital  values,  there  is  in  neither  of  these  values  any  social 
increment  whatever  which  may  be  segregated  and  measured 
so  as  to  form  a  natural  or  economic  revenue  for  the  State. 
Arbitrarily  such  values  may  be  taken — arbitrarily  they  are 
taken — by  the  State,  but  such  socialization  of  labor  values 
and  capital  values  is  without  any  economic  warrant  what- 
soever. If  men  are  to  be  taxed  in  proportion  to  the 
revenue  which  they  respectively  enjoy  under  the  protec- 
tion of  the  State,  as  stated  in  one  of  the  famous  canons 
of  Adam  Smith,  we  must  look  elsewhere  than  to  labor- 
forms  and  capital-forms  for  any  value  or  values  which 
reflect  governmental  benefits.  So  far  as  labor-forms  and 
capital-forms  are  concerned  such  benefits  are  manifested 
in  an  increase  of  immeasurable  utilities,  and  a  correspond- 
ing decrease  of  those  measurable  utilities  which  constitute 
labor  values  and  capital  values. 

The  existence  of  a  general  market  in  a  well  ordered 
State  gives  to  every  member  thereof  a  higher  satisfaction  of 
desire,  a  greater  degree  of  enjoyment,  physical  and  mental ; 
but  so  far  as  this  enjoyment  has  to  do  with  labor-forms  and 
capital-forms  it  is  largely  immeasurable.  There  is  no  means 


OF  THE  SOCIALIZATION  OF  VALUES  •^'51 

by  which  labor  values  and  capital  values  commensurate  with 
such  enjoyment  and  economically  equivalent  thereto  can 
be  measured.  Indeed,  in  present  conditions,  although  the 
canon  of  Adam  Smith  is  theoretically  the  basis  of  taxa- 
tion, the  fact  is  that  it  is  the  necessities  of  the  State,  and 
not  the  amount  of  protection  which  it  affords  to  labor- 
forms  and  capital-forms,  which  determines  what  tax  shall 
be  levied  upon  personal  property  each  year.  Whatever 
may  be  the  doctrine  of  the  schools,  men  are  taxed  nowa- 
days because,  upon  the  one  hand,  they  are  possessed  of 
certain  values,  and  upon  the  other  hand,  because  the  State 
needs  a  part  of  those  values  for  revenue.  No  inquiry  is 
made  as  to  how  those  values  were  acquired,  nor  as  to 
whether  they  have  been  created,  increased,  or  diminished 
by  the  existence  of  the  State.  Diligent  search  is  made  to 
unearth  values  which  are  wholly  devoid  of  social  incre- 
ment, while  other  values  which  are  distinctly  the  result  of 
associated  effort  in  industry  and  exchange  under  the  pro- 
tection of  the  State,  and  which  can  not  possibly  be  con- 
cealed, are  passed  by  without  special  notice  or  considera- 
tion. 

Although  the  benefits  of  association  with  reference  to 
labor-forms  and  capital-forms  are  reflected  in  increased 
utility  which  is  not  reducible  to  a  measurable  form,  the 
reverse  is  true  with  reference  to  land-forms.  Labor-forms 
which  sell  at  the  same  price,  and  have  consequently  the 
same  value,  in  a  given  market,  are  produced  upon  land- 
forms  of  varying  utility.  The  better  situated  or  more 
fertile  the  land-form  occupied  by  a  given  producer,  the 
more  net  value  he  realizes  by  selling  his  product  at  the 


252  BISOCIALISM— POLITICAL  ECONOMY 

market  price.  The  greater  the  population  within  the  ter- 
ritory tributary  to  a  general  market,  the  greater  the  advan- 
tage of  occupying  a  superior  land-form  and  the  greater  the 
competition  for  its  possession. 

The  growth  of  the  community  merely  as  a  community 
and  irrespective  of  the  organization  called  the  State  brings 
about  a  constant  tendency  toward  the  increase  of  land 
values.  WTiile  the  State  itself,  by  maintaining  a  system 
of  land  tenure  under  which  men  may  exclusively  occupy 
particular  land-forms  and  produce  upon  them  in  safety, 
adds  still  further  to  the  values  of  all  land-forms  within 
its  limits.  Nor  is  this  increase  of  land  values  exhibited 
only  upon  the  producer's  side  of  the  market.  Land-forms 
which  are  well  suited  to  the  needs  of  buyers  and  of  ulti- 
mate consumers  of  labor-forms — such  as  desirable  resi- 
dence lots  near  a  general  market — also  bear  a  high  value. 
It  is  not  necessary  for  us  to  repeat  our  former  illustrations, 
especially  those  given  in  the  chapters  concerning  "Ground 
Rent  and  Ground  Value"  and  "Land  Tenure,"  in  order 
to  show  that  all  the  measurable  utilities,  or  benefits,  of 
civilization,  as  well  as  of  government,  are  reflected  in  land 
values. 

In  the  last  chapter  we  discussed  the  subject  of  franchise 
values,  and  showed  that  while  they  are  essentially  differ- 
ent from  labor  values  and  capital  values  they  bear  a  close 
relation  to  land  values.  Franchise  values  have  all  the 
characteristics  of  land  values  and  one  more,  viz.,  they 
distinctively  result  from  the  use  of  land-forms  in  busi- 
nesses normally  non-competitive.  Land  values  dis- 
tinctively result  from  the  use  of  land-forms  in  businesses 


OF  THE  SOCIALIZATION  OF  VALUES  253 

normally  competitive.  Franchise  values,  like  land  values, 
have  an  economic  basis  in  the  use  of  superior  land-forms, 
and,  like  them,  are  increased  with  the  growth  of  the  com- 
munity and  the  security  which  results  from  the  existence 
of  government.  The  action  of  the  State  in  granting  fran- 
chises still  further  increases  these  values.  Like  land  values 
franchise  values  have  distinctively  a  social  content  and 
can  not  be  traced  to  the  labor-power  of  particular  indi- 
viduals. Like  land  values  they  are  susceptible  of  taxa- 
tion to  the  full  extent  of  their  present  worth,  and  this 
without  increasing  the  disutility,  industrial  or  commercial, 
of  any  person.  The  present  worth  of  land  value  is  repre- 
sented by  ground  value.  The  complete  socialization  of 
both  ground  values  and  franchise  values  is  economically 
possible,  feasible,  and  desirable,  for  by  this  means  all 
labor  values  and  capital  values  which  have  no  social  con- 
tent may  be  left  as  the  rewards  of  the  individual  skill  and 
industry  which  produce  and  conserve  them. 

Monopoly  values  have  no  economic  basis  whatever.  They 
are  purely  the  result  of  the  arbitrary  action  of  the  State, 
and  can  not  exist  in  the  hands  of  favored  persons  without 
adding  to  the  disutility  of  all  other  persons  affected  thereby 
either  as  competing  sellers  or  as  buyers.  They  can  not  be 
socialized,  because  to  the  extent  they  are  taxed  the  burden 
is  shifted  to  consumers  or  the  monopoly  itself  is  destroyed. 
They  ought  not  to  be  individualized,  because  they  are  not, 
to  any  extent,  the  result  of  individual  skill  or  industry. 

Although  Adam  Smith,  in  his  canon  of  taxation,  to 
which  reference  has  already  been  made,  used  the  word 
"revenue^"  it  is  apparent  that  by   that  word  he  meant 


254  BISOCIALISM— POUTICAL  ECONOMY 

'^benefits/'  and  that  what  he  really  advocated  was  the  taxa- 
tion of  men  in  proportion  to  the  benefits  which  they  re- 
spectively enjoy  under  the  protection  of  the  State.  Many 
men  who  are  taxed  presumably  pursuant  to  this  canon  have 
no  revenue  at  all  in  the  sense  of  current  income  from  the 
things  taxed.  Such  men  are  the  owners  of  vacant  lots  and 
lands,  moneys  in  bank,  or  of  any  kind  of  so-called  unpro- 
ductive property. 

Even  with  this  modification,  however,  this  canon  of 
taxation  is  incorrect.  Behind  both  the  revenues  and  the 
benefits  which  men  enjoy  stand  the  opportunities  which 
make  these  revenues  and  benefits  possible.  Primarily  man 
is  possessed  of  labor-power,  the  exertion  of  which  will 
satisfy  his  desires  according  to  the  external  opportunities 
which  are  open  to  him  and  upon  which  his  labor-power 
may  be  exerted.  Upon  the  economic  margin  natural  op- 
portunities are  equally  open  to  all  men,  but  above  this 
margin  this  is  not  true.  All  men  can  not  equally  occupy 
and  enjoy  any  superior  land-form.  The  exclusive  indi- 
vidual occupation  and  enjoyment  of  superior  land-forms  is 
imperative,  both  because  of  physical  necessity,  and  in  order 
to  secure  the  best  use  of  such  land-forms;  but  such  exclu- 
sive enjoyment  in  an  orderly  state  of  society  can  be  main- 
tained only  by  law. 

Men  can  not  be  taxed  according  to  all  the  natural  oppor- 
tunities which  they  enjoy,  because  opportunities  which 
they  enjoy  equally  or  in  common  are  immeasurable.  On 
the  other  hand,  the  advantage  of  one  natural  opportunity 
over  another  is  exactly  measured  by  their  difference  in 
value.     It  is  possible,  therefore,  to  tax  men  according  to 


OF  THE  SOCIALIZATION  OF  VALUES  2  5 -5 

the  differences  of  their  respective  enjoyment  of  natural 
opportunities  under  the  law.  Taxation  upon  this  basis 
is  morally  right  and  economically  correct.  For  however 
much  men  may  differ  in  ability  either  to  create  labor- 
forms,  or  to  use  and  conserve  them  as  capital-forms,  it  is 
demanded  by  the  plainest  dictates  of  justice  and  of  ex- 
pediency that  they  have  equal  opportunities  to  produce 
and  enjoy  so  far  as  external  natural  opportunities  are  con- 
cerned. Such  equality  of  opportunity  can  only  be  ac- 
quired by  the  taxation  of  natural  opportunities  to  the  full 
extent  of  their  present  worth  each  year. 

On  the  other  hand,  having  produced  in  circumstances  of 
equality  of  opportunity,  each  man  is  then  entitled  to  his 
whole  product,  free  from  any  claim  of  the  State  upon  it 
by  way  of  taxation  or  othervdse.  The  true  canon  of  taxa- 
tion expressed  in  general  terms  is  this: 

Men  should  be  taxed  only  in  proportion  to  the  external 
natural  opportunities  which  they  exclusively  enjoy  or  con- 
trol under  and  by  virtue  of  the  laws  of  the  State;  and 
they  should  be  taxed  to  the  full  extent  of  the  present  worth 
of  such  exclusive  opportunities,  annually  computed. 

All  natural  opportunities  are  enjoyed  and  controlled 
through  the  possession  or  control  of  land-forms,  either 
under  ordinary  land  tenure  or  under  the  grant  of  fran- 
chises. All  the  measurable  benefits  of  association  and 
government  as  well  as  of  the  exclusive  possession  of  natural 
opportunities  are  manifested  in  ground  values  and  fran- 
chise values,  and  in  no  other  way.  Therefore,  technically 
and  more  briefly  the  true  canon  of  taxation  is  as  follows : 

Men  should  be  taxed  only  upon  the  ground  values  and 


256  BISOCIALISM— POLITICAL  ECONOMY 

the  public  utility  franchise  values  (if  any)  annually  pos- 
sessed by  them,  and  should  be  taxed  to  the  full  extent 
thereof  every  year. 

It  may  be  urged  against  this  canon  of  taxation  that  if  an 
attempt  was  made  to  socialize  ground  values  by  means  of 
levying  all  taxes  thereon,  the  land  owners  would  shift  the 
burden  to  their  tenants  in  increased  rents  and  so  be  as 
well  off  as  before.  But  this  is  impossible.  When  the 
value  of  property  distinctively  the  result  of  labor-power 
is  taxed  the  tax  may  be  passed  along  from  owner  to  user; 
but  when  mere  legal  privilege  in  the  control  of  natural 
opportunities  is  taxed  this  is  not  true.  A  tax  on  the 
value  of  houses  tends  to  discourage  the  building  of 
houses  and  to  make  them  scarce  and  consequently  dear. 
But  a  tax  upon  the  value  of  bare  land-forms,  irrespective 
of  improvements,  does  not  tend  to  make  land-forms  scarce. 
On  the  contrary  it  tends  to  discourage  the  holding  of  land- 
forms  out  of  use,  or  for  any  purpose  other  than  their  best 
use,  and  consequently  to  increase  the  supply  of  land-forms 
open  to  immediate  use  and  occupation  for  industrial  and 
residence  purposes.  This  tends  to  decrease  the  rental 
values  of  all  land-forms  and  to  benefit  not  only  all  tenants, 
but  all  prospective  buyers  of  land-forms. 

It  must  be  remembered,  also,  that  this  new  canon  of 
taxation  proposes  to  take  all  the  ground  value  of  a  given 
land-form  every  year.  An  arbitrary  increase  in  ground 
rent,  if  this  were  possible,  would  result  in  increased  ground 
value,  and  this  would  simply  increase  the  revenue  of  the 
State;  it  would  not  really  benefit  the  land  owner. 

If  it  were  possible  for  land  owners  as  a  class  to  exact 


OF  THE  SOCIALIZATION  OF  VALUES  257 

more  ground  rent  from  their  tenants,  they  would  do  it 
now  without  waiting  for  the  excuse  of  increased  taxation. 
They  now  take  in  annual  ground  rentals  all  the  return 
which  results  from  the  use  of  land-forms  above  the  pres- 
ent economic  margin.  ISTothing  can  operate  to  increase 
present  rentals  except  it  lowers  the  present  margin.  This 
the  taxation  of  ground  values  can  not  do.  By  throwing 
all  valuable  land-forms  into  use  it  will  necessarily  raise  the 
economic  margin  and  to  that  extent  will  decrease  ground 
rents.  At  the  same  time  the  entire  exemption  of  all 
buildings  and  all  building  materials  from  taxation,  direct 
and  indirect,  will  encourage  the  building  of  houses,  stores, 
and  factories,  relieve  the  present  scarcity,  and  so  diminish 
building  rents  (a  form  of  interest)  as  well  as  ground 
rents  themselves.  In  such  circumstances  it  is  impossible 
for  any  landlord  to  raise  his  ground  rents  arbitrarily, 
or  in  any  manner  shift  the  burden  of  taxation  upon  indus- 
try and  exchange,  when  ground  values  are  socialized  by 
means  of  taxation. 


CHAPTER  V. 

OF  THE  ECONOMIC  IMPERATIVE. 

We  must  make  room  at  the  Father's  table  for  all  his  chil- 
dren. Father  Edward  McGlynn. 

We  have  now  treated  in  a  brief  yet  comprehensive  man- 
ner all  of  the  primary  questions  which  pertain  to  Eco- 
nomic Science  in  both  normal  and  abnormal  conditions. 
All  other  questions  which  may  arise  are  subsidiary  to 
these,  and  may  readily  be  classified  and  analyzed  in  the 
light  of  what  has  already  been  given.  We  have  carried 
our  analyses  into  the  minutest  details  where  details  have 
been  important,  and  have  clearly  defined  every  term  having 
a  distinctive  economic  meaning.  In  no  case  has  a  term 
been  defined  in  one  way  and  afterwards  used  in  another; 
nor  has  any  definition,  statement,  or  argument  been  used 
which  in  any  manner  contradicts  or  even  fails  to  support 
any  other  definition,  statement  or  argument  to  be  found 
in  the  text.  Every  phase  of  the  subject  touched  upon  has 
been  considered  in  relation  to  all  economic  phenomena 
and  all  deductions  have  been  pressed  to  their  ultimate  con- 
elusions  regardless  of  consequences.  We  are  now  prepared 
to  say  upon  the  authority  of  Economics  and  with  the  certi- 
tude of  science  that  there  is  a  criterion  by  which  the  policy 
of  the  State  toward  the  institution  of  property  under  any 
system,  actual  or  proposed,  may  be  tested  and  correctly 

258 


OF  THE  ECONOMIC  IMPERATIVE  259 

determined.  For  the  statesman  there  is  an  Economic 
Imperative.     It  is  this: 

The  State  must  destroy  all  monopoly  values;  it  must 
socialize  all  ground  values  and  all  public  utility  franchise 
values;  it  must  individualize  all  labor  values  and  capital 
values;  and  withal  it  must  maintain  an  economic  system 
which  permits  and  protects  the  fullest  cooperation  in  in- 
dustry and  the  freest  competition  in  exchange. 

From  an  economic  point  of  view  this  statement  fur- 
nishes the  State  with  its  only  reason  for  existence.  It  is 
the  answer  of  Economic  Science  to  the  anarchist*  In  any 
state  of  society  where  civilized  men  are  entirely  and 
equally  free — and  the  anarchist's  conception  is  based  upon 
the  ideas  of  civilization  and  of  entire  equal  freedom — men 
will  produce  labor-forms  according  to  their  predilections 
and  their  environment,  and  will  exchange  them  for  the 
products  of  others.  The  denial  of  the  right  of  exchange 
is  contrary  to  the  fundamental  tenet  of  anarchism ;  such  a 
denial  is  advocated  only  by  the  omnisocialist. 

It  follows,  therefore,  that  the  anarchist  is  bound  by  all 
the  natural  laws  of  the  market  and  by  all  the  results  which 
naturally  flow  from  those  laws.  In  the  absence  of  any 
government  at  all,  i.  e.,  in  the  absence  of  any  body  politic, 
labor  values,  capital  values,  and  land  values  will  inevitably 
accrue.  And  Just  as  inevitably  labor  values  and  capital 
values  will  tend  to  fall,  and  land  values  will  tend  to  risp. 
The  value  of  land-forms  then,  as  now,  would  be  an  un- 
earned increment,  and  would  have  to  be  disposed  of  in  one 


•  See  Part  I,  page  19. 


'^60  BISOCIALISM— POLITICAL  ECONOMY 

of  two  way?.  If  it  were  left  in  the  hands  of  the  fortunate 
individuals  who  occupied  or  owned  the  superior  land-forms, 
they  would  thus  secure  a  differential  value  created  by 
others  than  themselves,  and  the  law  of  equal  freedom 
would  be  broken.  No  man  can  occupy  or  own  a  superior 
land-form  to  the  exclusion  of  his  fellows  without  infringing 
upon  the  equal  freedom  of  all  other  men  in  the  use  of  the 
earth — the  storehouse  of  nature.  And  if  it  were  sought 
to  equalize  the  use  of  land-forms,  this  could  be  done  only 
by  some  form  of  governmental  action.  In  any  com- 
munity in  which  it  is  necessar}'  for  different  persons  to 
occupy  and  use  land-forms  of  different  degrees  of  desira- 
bility, either  the  law  of  equal  freedom  must  be  broken,  or 
gome  sort  of  compact  must  be  made  and  carried  out  by  the 
community  as  a  whole.  Neither  of  these  is  consistent  with 
anarchism,  for  the  making  and  enforcement  of  such  a  com- 
pact necessarily  involves  a  body  politic. 

If  equality  of  opportunity  is  to  be  acquired  at  all  in 
any  community,  it  must  be  by  collective  or  governmental 
action.  The  fact  that  governmental  action  has  been  in 
vogue  for  centuries  without  securing  equality  of  oppor- 
tunity in  any  state  or  nation  gives  to  the  anarchist  a  coign 
of  vantage  in  argument  from  which  it  is  not  easy  to  dis- 
lodge him.  Yet  if  it  is  within  the  power  of  government 
to  accomplish  a  given  result,  the  fact  that  it  has  neither 
accomplished  such  result  nor  seriously  attempted  to  do 
so  does  not  warrant  the  conclusion  that  all  government 
should  be  abolished.  Nor  does  the  fact  that  certain  acts 
or  laws  of  the  State  sometimes  or  even  continuously  op- 
press and  exploit  those  whom  the  State  is  presumed  to  pro- 


OP  THE   ECONOMIC  IMPERATIVE  261 

teet  show  any  necessity  for  the  abolition  of  the  State.  It 
is  only  necessary  to  abolish  the  injustice  and  oppression. 

If  all  land-forms  were  of  equal  desirability,  there  would 
be  no  land  values  and  no  distinctively  economic  reason 
for  the  existence  of  the  State.  In  the  absence  of  any 
juridical  law,  labor  values  and  capital  values  would  be  dis- 
tributed automatically  by  the  laws  of  the  market,  except 
in  so  far  as  such  laws  should  be  interfered  with  by  rob- 
bery, theft,  or  other  forcible  exploitation  of  one  man  by 
another.  To  prevent  such  forcible  exploitation  the  State 
is  indeed  necessary,  but  its  necessity  in  that  behalf  is 
civic,  not  economic.  The  economic  function  of  the  State 
is  to  prevent  the  exploitation  of  one  man  by  another,  not 
by  force,  but  by  the  monopolization  of  natural  opportuni- 
ties; that  is,  it  is  the  economic  function  of  the  State  to 
socialize  natural  opportunities.  The  only  way  in  which 
this  can  be  done  with  justice  to  all  and  without  arbitrarily 
and  unequally  abridging  the  freedom  of  the  individual 
members  of  the  State  is  by  socializing  the  distinctive  dif- 
ferential values  of  these  opportunities.  As  was  shown  in 
a  former  chapter,  this  may  be  done  by  the  imposition  and 
collection  of  an  annual  tax  to  the  amount  of  the  full  sell- 
ing value  of  all  land-forms  and  franchises.  The  selling 
value  of  land-forms  and  franchises,  it  will  be  remem- 
bered, would  then  be  less  than  their  annual  rent  or  in- 
come; they  would  sell  for  the  present  worth  of  the  ground 
rent  or  income,  as  the  case  might  be,  computed  at  the 
current  rate  of  interest. 

Therefore,  the  economic  function  of  the  State  resolves 
itself  into  the  annual  socialization,  by  means  of  taxation 


262  BISOCIALISM— POLITICAL   ECONOMY 

and  public  expenditure,  of  all  ground  values,  and  of  all 
franchise  values,  if  public  utilities  are  permitted  to  remain 
in  private  hands.  Its  civic  function  is  the  protection  of 
the  individual  citizen  in  his  freedom  to  cooperate  or  not, 
as  he  sees  fit,  in  industry,  and  to  compete  or  not,  as  he 
sees  fit,  in  exchange.  But  whether  the  individual  chooses 
to  cooperate  or  to  work  out  his  own  salvation  in  industry, 
or  to  compete  or  not  to  compete  in  exchange,  the  State, 
in  the  exercise  of  its  civic  function,  must  see  to  it  that 
he  interferes  not  with  the  freedom  of  others  to  cooperate 
and  compete  as  they  will,  and  that  he  exploits  not  the 
earnings  of  any  man  either  by  force  or  by  fraud. 

To  any  existing  institution  or  to  any  proposed  change 
of  economic  policy,  thereforo,  both  the  student  and  the 
statesman  may  apply  these  unfailing  tests: 

Does  it  tend  to  destroy,  or  to  create  and  maintain  mo- 
nopoly values?  If  to  destroy  them,  it  is  to  be  upheld; 
if  to  create  or  maintain  them,  it  is  to  be  condemned. 

Does  it  tend  to  socialize  all  ground  values  and  all  public 
utility  franchise  values  ?  If  so,  it  is  to  be  upheld ;  if  not, 
it  is  to  be  condemned. 

Does  it  tend  to  individualize  all  labor  values  and  capital 
values  ?  If  so,  it  is  to  be  upheld ;  if  not,  it  is  to  be  con- 
demned. 

Does  it  tend  to  permit  and  protect  the  fullest  coopera- 
tion in  industry  ?  If  so,  it  is  to  be  upheld ;  if  not,  it  is  to 
be  condemned. 

Does  it  tend  to  pcnnit  and  protect  the  freest  competition 
in  exchange?  If  so,  it  is  to  be  upheld;  if  not,  it  is  to  be 
condemned. 


OF  THE   ECONOMIC   IMPERATIVE  2G3 

What  could  be  more  simple  than  these  tests?  Yet  the 
application  of  them  to  practical  affairs  is  all  that  stands 
between  men  and  economic  freedom — equal  freedom  not 
only  of  person,  but  of  opportunity.  It  is  all  that  stands 
between  those  who  produce  and  the  whole  product  which 
distinctively  is  theirs. 

In  the  light  of  these  simple  tests  what  becomes  of  the 
insistent  demand  for  government  by  experts  ?  These  tests 
are  so  simple  that  the  people  should  soon  learn  to  govern 
themselves  in  fact  as  well  as  in  name.  If  they  would  be 
masters  of  themselves  and  control  their  own  destinies,  let 
them  but  heed  and  enforce  the  economic  imperative: 

The  State  must  destroy  all  monopoly  values;  it  must 
socialize  all  ground  values  and  public  utility  franchise 
values;  it  must  individualize  all  labor  values  and  capital 
values;  and  withal  it  must  maintain  an  economic  system 
which  permits  and  protects  the  fullest  cooperation  in  in- 
dustry and  the  freest  competition  in  exchange ! 


CHAPTEE  VI. 

OF  THE  ESTABLISHED  OEDER. 

Wooley  Foster  has  a  hen, 
Cockle  button,  cockle  ben; 
She  lays  eggs  for  gentlemen — 
But  none  for  Wooley  Foster. 

Mother  Goose  Melodies. 

When  Adam  delved  and  Eve  span, 
Who  was  then  the  gentleman? 

Popular  couplet,  fourteenth  century. 

Judged  by  the  economic  imperative,  the  existing  eco- 
nomic system  is  condemned  upon  every  hand.  It  grants 
and  fosters  many  monopolies,  and  thus  creates  and  main- 
tains monopoly  values;  it  fails  to  socialize  either  ground 
values  or  public  utility  franchise  values,  leaving  them  al- 
most wholly  in  private  hands  to  the  upbuilding  of  great 
private  fortunes,  economically  unearned  by  the  individual 
holders;  it  fails  to  individualize  either  labor  values  or 
capital  values,  since  nearly  all  of  the  revenues  of  the  State 
are  drawn  therefrom;  and  it  neither  permits  nor  protects 
full  cooperation  in  industry,  nor  free  competition  in  ex- 
change. 

In  the  established  order  the  normal  economic  margin  is 
unknown.  Land-form  after  land-form  is  held  out  of  use, 
or  is  not  put  to  its  best  use,  and  by  these  means  the  rent 
line  is  forced  down  until  it  lies  far  below  the  normal 
margin.     The  marginal  pairs  that  determine  prices  in  all 

264 


OF  THE  ESTABLISIHED  ORDER  265 

branches  of  industry  and  trade  are  men  who  produce  upon 
margins  artificially  depressed  so  that  market  price  is  not 
the  true  index,  as  it  should  be,  of  normal  economic  con- 
ditions. In  industries  not  in  themselves  the  beneficiaries 
of  some  monopoly,  e.  g.,  the  business  of  the  working 
farmer,  the  market  price  is  forced  abnormally  low,  both 
because  the  marginal  buyer  produces  upon  a  low  plane  and 
is  poor,  and  because  the  marginal  seller  also  produces  upon 
a  low  plane  and  can  not  stand  out  for  a  higher  price. 

In  industries  which  are  the  beneficiaries  of  one  or  more 
monopolies,  simple,  complex  or  compound,  the  seller  is 
made  abnormally  independent  of  the  laws  of  the  market 
and  can  ignore  the  normal  price;  while  the  buyer,  who  is 
usually  engaged  in  an  industry  not  favored  by  any  mo- 
nopoly, is  helpless  to  stand  out  for  the  normal  price,  and 
must  pay  what  is  asked,  or  do  without  what  he  desires. 
The  only  thing  which  induces  the  monopolist  to  concede 
anything  in  the  matter  of  price  within  the  range  of  his 
control  is  the  fact  that  he  may  gain  more  by  increased 
sales  at  a  decreased  net  value  on  each  sale.  But  even  then 
the  price  which  he  consents  to  take  is  abnormal.  It  is  not 
determined  by  a  normally  marginal  pair,  but  by  the  self- 
interest  of  the  monopolist  himself. 

From  the  arbitrary  lowering  of  the  economic  margin 
upon  the  one  hand  and  the  existence  of  industrial  and 
trade  monopolies  upon  the  other,  it  necessarily  follows 
that  all  prices  in  present  conditions  are  abnormal.  They 
are  too  low  in  industries  not  favored  by  monopolies  or 
franchises,  and  too  high  in  those  industries  which  are  so 
favored.     And  yet  the  working  farmer,  who  is  peculiarly 


■riGG  BISOCIALISM— POLITICAL   ECONOMY 

the  victim  of  both  these  abnormal  conditions,  is  depended 
upon  by  its  beneficiaries  as  the  most  loyal  defender  of  the 
established  order.  The  farmer  does  not  see  that  by  the 
artificial  depression  of  the  economic  margin  he  is  forced 
to  pay  much  more  than  the  normal  price  when  he  buys  a 
farm,  and  much  more  than  the  normal  rent  when  he  tills 
a  farm  as  a  tenant.  Xor  does  he  see  that  as  a  seller  of 
products  he  has  no  monopoly  whatever,  but  must  compete 
with  all  others  of  his  class  in  the  markets  of  the  world ; 
while  the  price  of  practically  everything  which  he  buys  is 
affected  by  some  form  of  differential  privilege. 

Every  wage  earner,  every  man  in  any  vocation  what- 
ever who  is  dependent  upon  toil,  physical  or  mental,  for  a 
livelihood  is  affected  in  the  same  manner  as  the  working 
farmer  by  the  artificial  depression  of  the  margin  and  the 
existence  of  monopolies.  The  abnormal  depression  of  the 
margin  forces  him  to  pay  a  greatly  increased  price  for  a 
home,  if  he  is  fortunate  enough  to  be  able  to  purchase  one, 
or  to  pay  a  greatly  increased  rent,  if  he  can  not  or  does 
not  buy.  He  must  either  invest  what  to  him  is  a  small 
fortune  in  a  home,  or  he  must  continually  pay  tribute  to 
a  landlord  in  ground  rent.  For  so  far  as  ground  rent  paid 
to  a  private  owner  in  present  conditions  is  concerned  it  is 
nothing  more  nor  less  than  the  payment  by  one  man  to 
another  no  better  than  himself  of  tribute  for  the  mere 
privilege  of  living  upon  the  earth.  If  the  rent  payer  stays 
upon  the  earth  at  all,  he  must  stay  in  some  particular  place 
at  any  given  time.  And  unless  he  betakes  himself  to  the 
desert  or  lives  among  savages,  he  can  not  find  a  place  any- 
where where  he  can  even  pitch  a  tent  without  the  consent 


OF  THE  ESTABLISHED  ORDER  267 

of  a  fellow  creature.  In  a  state  of  savagery  he  might  meet 
a  fellowman,  armed  with  a  club,  who  would  dispute  with 
him  the  right  to  occupy  a  particular  land-form  unless  he 
gave  up  half  his  average  income  from  the  chase  for  the 
privilege.  In  a  state  of  civilization  he  meets  a  fellow- 
man,  armed  with  a  statute,  who  makes  of  him  a  similar 
demand  with  regard  to  his  income  every  year,  and  he  is 
obliged  to  succumb.  Verily,  our  boasted  civilization  in 
some  respects  is  simply  a  refinement  of  savagery. 

When  the  wage  earner  buys  either  the  necessaries  or  the 
luxuries  of  life  he  usually  pays  tribute  to  a  monopolist. 
In  this  respect  he  is  no  better  off  than  the  working  farmer. 
If  of  nothing  else,  he,  like  the  farmer,  is  the  victim  of  a 
so-called  protective  tariff  which,  fixes  the  price  of  all  pro- 
tected articles  above  the  price  which,  in  normal  conditions, 
would  be  fixed  by  the  marginal  pair.  When  the  wage 
earner  seeks  employment  he  must  compete  in  price  with 
men  who  are  willing  to  accept  in  the  service  of  others  just 
what  they  could  earn  by  self-employment  upon  an 
abnormally  depressed  and  unproductive  margin. 

The  necessities  of  the  marginal  laborer  are  of  greater 
importance  in  the  fixing  of  wages  than  is  the  parsimony 
of  the  employer.  For  however  much  an  employer  may 
harden  his  heart  and  attempt  to  oppress  his  employes,  it  is 
only  the  necessities  of  the  latter,  or  of  some  other  workmen 
below  them  who  can  be  induced  to  take  their  places,  that 
give  to  the  employer  an  opportunity  to  manifest  and  sat- 
isfy his  selfish  greed.  It  is  this  fact  which  leads  the  mem- 
bers of  a  labor  union  not  only  to  antagonize  every  interest 
of  an  employer  while  they  are  upon  a  strike,  but  to  look 


•268  BISOCIALISM— POLITICAL   ECONOMY 

upon  one  of  their  own  class  who  refuses  to  strike  or  who 
takes  the  place  of  a  striker — a  "scab"  workingman — with 
infinite  scorn  and  contempt,  and  oftentimes  with  unre- 
lenting hate.  If  wage  earners  as  a  class  are  permanently 
to  better  their  condition,  they  must  bring  about  the 
restoration  of  the  normal  economic  margin  upon  the  one 
hand,  and  the  destruction  of  monopoly  upon  the  other. 
By  united  action  they  can  do  this,  and  the  more  readily, 
if  the  working  farmers  and  all  other  men  engaged  in  busi- 
ness enterprises  not  specially  favored  by  the  State  should 
join  them. 

Every  man  engaged  in  a  business  enterprise,  great  or 
small,  which  is  not  specially  favored  by  some  form  of  dif- 
ferential privilege  is  injuriously  affected  as  a  business 
man  both  by  the  abnormal  depression  of  the  economic  mar- 
gin and  by  the  existence  of  differential  privileges  in  the 
hands  of  others.  If  a  business  man  is  so  fortunate  as  to 
own  the  land-forms  upon  which  his  business  is  conducted, 
he  is  compelled  in  purchasing  them  to  pay  much  more 
than  their  normal  price,  and  to  keep  invested  in  them  a 
large  sum  for  which  there  is  no  current  return,  and  which 
detracts  by  just  so  much  from  his  investment  in  the  busi- 
ness proper.  If  he  is  a  tenant,  his  ground  rent  is  all  that 
he  can  bear  and  constantly  tends  to  exhaust  the  earnings 
of  his  business.  On  the  other  hand,  a  monopoly  in  the 
hands  of  a  competitor  means  a  relative  loss  to  him  and 
may  encompass  his  ruin;  while  as  a  consumer  he  is  sub- 
jected to  all  the  evils  which  befall  the  farmer  and  the 
artisan  from  the  existence  of  different  forms  of  monopoly 
in  the  hands  of  those  from  whom  he  must  buv.     All  of  the 


OF  THE  ESTABLISHED  ORDER  369 

laws  of  the  normal  market  are  based  upon  the  existence  of 
a  normal  economic  margin  and  of  a  normal  marginal  pair. 
The  established  order  makes  the  existence  of  both  of  these 
impossible,  and  nothing  short  of  the  complete  alteration 
of  the  status  quo  in  so  far  as  it  interferes  with  these  prime 
requisites  of  economic  conditions  can  cure  the  evils  of 
which  the  masses  complain,  but  which  they  do  not  fully 
understand. 

Standard  Political  Economy,  as  the  exponent  of  the  es- 
tablished order,  originally  held  that  the  value  of  anything 
is  determined  by  the  cost  of  its  production.  It  requires 
only  a  casual  view  of  this  theory  to  disclose  the  fact  that 
it  is  not  universally  true.  Many  things  are  put  upon  the 
market  and  sold  at  less  than  the  cost  of  production.  To 
make  the  theory  cover  numerous  exceptions  of  this  kind 
it  was  next  held  that  it  is  not  the  cost  of  the  original  pro- 
duction of  any  thing  which  determines  its  value,  but  the 
cost  of  its  reproduction  (or  rather,  the  cost  of  its  duplica- 
tion) at  the  present  time.  But  neither  the  cost-of-produc- 
tion  theory  nor  the  cost-of-reproduction  theory  of  value 
applies  to  land  values,  since  land-forms  are  neither  pro- 
duced nor  reproduced  by  the  hand  of  man. 

There  is  another  aspect,  moreover,  in  which  the  theories 
of  standard  political  economists  concerning  value  fail  to 
conform  to  the  most  obvious  facts  of  the  market.  If  the 
value  of  an  article  is  determined  by  either  the  cost  of  its 
production  or  the  cost  of  present  reproduction,  it  must 
necessarily  follow  that  the  value  of  a  composite  article  is 
at  least  equal  to  the  sum  of  the  costs  of  its  various  com- 
ponent parts.     But  this  is  not  always  true.     It  is  not  the 


270  BISOCIALISM— POLITICAL   ECONOMY 

cost,  as  exhibited  in  market  price,  of  the  labor  and  mate- 
rials which  enter  into  a  finished  product  which  determines 
the  price  at  which  it  may  be  sold.  This  price  is  fixed  by 
those  persons  who  constitute  the  marginal  pair  with  refer- 
ence to  this  particular  article,  and  especially  by  the  mar- 
ginal buyer,  who  may  neither  know  nor  care  any  thing 
whatever  about  the  cost  of  the  constituent  parts.  On  the 
contrary,  it  is  the  price  of  the  finished  article  as  deter- 
mined by  the  marginal  pair  which  determines  the  prices 
at  which  the  component  parts  must  be  sold  in  order  to 
leave  a  net  value  to  the  producer  of  the  completed  article, 
and  so  to  assure  its  continued  production.  For  unless  the 
necessary  parts  can  be  purchased  at  certain  prices  the 
manufacture  of  the  finished  article  must  cease. 

Suppose,  now,  that  in  the  case  of  a  composite  article  for 
which  there  is  a  sufficient  demand  to  justify  its  continued 
production  in  normal  conditions,  there  falls  into  the  hands 
of  one  person,  firm  or  corporation,  a  monopoly  as  to  the 
manufacture  or  sale  of  one  of  the  parts  or  processes  neces- 
sary to  produce  such  article.  Then  the  possessor  of  such  a 
monopoly  can  arbitrarily  determine  whether  or  not  the 
composite  article  shall  further  be  produced  at  all.  He  can 
despoil  the  hitherto  successful  producer  to  the  last  cent 
which  can  be  spared  not  only  of  the  net  value  from  that 
part  of  the  product  upon  which  the  monopoly  is  held,  but 
from  the  entire  business,  since  the  monopolist  may  at  any 
time  stop  the  supply  of  a  necessary  factor.  In  case  the 
monopolist  should  resort  to  this  extremity,  he  not  only 
would  ruin  the  business  of  the  manufacturer  of  this  par- 
ticular article,  but  he  would  deprive  the  sellers  of  all  the 


OF  THE  ESTABLISHED  ORDER  271 

other  constituent  parts  of  such  article  of  a  customer  upon 
whom,  in  normal  conditions,  they  could  safely  rely.  Thus 
the  evil  effects  of  monopoly  do  not  fall  upon  consumers 
alone,  but  upon  producers  also,  and  such  effects  tend  to 
spread  in  an  ever  widening  circle  throughout  the  entire 
field  of  industry  and  exchange. 

It  must  be  remembered  that  the  power  of  the  monopolist 
over  production  is  not  confined  to  his  relations  with  one 
manufacturer  but  with  many.  Each  producer  whom  he 
despoils  of  normal  net  values  is  unable  by  just  so  much 
to  extend  his  business,  and  so  to  extend  the  market  for  the 
labor-power  and  products  of  others.  One  evil  effect  propa- 
gates another  until,  as  in  present  conditions,  the  power  of 
business  success  or  failure  is  held  by  one  man  over  many 
men  just  as  certainly  and  with  nearly  as  disastrous  results 
as  the  power  of  life  and  death  was  held  by  the  nobility  of 
ancient  times  over  their  chattel  slaves.  The  evil  effects  of 
the  established  order  we  see  and  feel  day  by  day.  The 
causes  of  such  conditions  are  obscured  by  the  teachings 
of  standard  Political  Economy,  based  as  it  is  upon  a  par- 
tially false  and  wholly  inadequate  theory  of  value. 

The  established  order  recognizes,  in  a  limited  way,  the 
beneficence  of  the  market;  but  not  sufficiently  to  make  the 
market  absolutely  free.  It  recognizes,  in  a  limited  way,  the 
great  truth  of  Economics  that  all  men  seek  to  satisfy  their 
desires  with  the  least  exertion;  but  at  the  same  time  it 
puts  it  in  the  power  of  some  men  to  interfere  with  the 
exertion  by  other  men  of  labor-power  along  the  lines  of 
least  resistance;  it  raises  its  revenues  in  such  manner  as 
seriously  and  unnecessarily  to  interfere  with  the  laws  of 


273  BISOCIALISM— POLITICAL   ECONOMY 

the  normal  market ;  and  it  allows  some  men  to  appropriate, 
own  and  control  all  of  the  desirable  land-forms  which 
other  men  must  use  in  order  to  satisfy  their  desires  at  all. 

The  established  order  fails  to  realize  the  beneficence  of 
the  market  in  bringing  about  the  socialization  of  utility. 
The  social  gain  resulting  from  the  fact  that  in  a  general 
market,  open  to  free  competition,  all  consumers  are  en- 
abled to  satisfy  their  desires  at  the  price  fixed  by  the  mar- 
ginal pair  is  ignored  by  standard  Political  Economy.  In 
the  discussions  of  this  cult,  net  salvage  is  also  practically 
ignored.  Net  value  is  the  one  desideratum — therefore, 
get  net  value.  This  is  its  teaching.  It  does  not  dis- 
criminate as  to  the  origin  of  values.  The  personal  appro- 
priation of  a  value  created  by  labor-power  has  no  higher 
sanction  in  its  teachings  than  the  personal  appropriation 
of  a  value  which  attaches  to  a  vacant  land-form  merely 
because  of  the  growth  and  productive  activity  of  the  com- 
munity as  a  whole  and  entirely  irrespective  of  any  effort 
or  expenditure,  past  or  present,  of  the  man  who  claims 
such  value  as  his  own. 

In  the  field  of  finance,  the  practices  of  the  established 
order  are  not  in  harmony  with  the  demands  of  the  eco- 
nomic imperative.  In  present  conditions  we  have  a  stand- 
ard of  value  which  recognizes  and  reflects  but  one  of  the 
three  elemental  units  of  disutility-  The  disutilities  of 
space  and  time  are  practically  ignored.  Accompanying 
this  defective  standard  of  value  we  have  a  medium  of 
exchange  based  upon  a  barter  metal  instead  of  upon  gov- 
ernmental credit-forms.  The  paper  money  issued  by  the 
national  government  consists  of  current  debit-forms  re- 


OP  THE  ESTABLISHED  ORDER  273 

deemable  in  the  gold  of  barbaric  barter  instead  of  cur- 
rent credit-forms  redeemable  in  the  pa}Tiient  of  the  taxes 
of  civilized  society. 

In  the  matter  of  taxation  the  established  order  violates 
all  the  requirements  not  only  of  the  economic  imperative, 
but  also  of  the  true  canon  of  taxation.  In  present  con- 
ditions taxes  are  levied  in  every  conceivable  way  upon  all 
conceivable  kinds  of  property  and  property  values,  and 
even  upon  men  themselves.  The  capitation,  or  poll,  tax 
is  an  arbitrary  tax  upon  men  at  so  much  a  head,  rich  or 
poor,  strong  or  feeble,  young  or  old,  after  reaching  man's 
estate.  Such  a  tax  is  always  unpopular  and  in  many 
places  has  passed  from  use. 

The  revenue  of  our  national  government  is  largely  de- 
rived from  tariff  duties  levied  upon  imports.  Such  a  sys- 
tem of  revenue  creates  monopoly  values ;  it  interferes  with 
the  beneficent  functions  of  the  normally  marginal  pairs; 
it  wrongfully  permits  the  individualization  of  the  natural 
revenues  of  the  State,  viz.,  ground  values  and  the  values 
of  public  utilities;  it  wrongfully  socializes  those  values 
which  should  be  wholly  left  to  individuals,  viz.,  labor 
values  and  capital  values,  for  all  tariffs  are  levied  upon 
these  alone ;  it  hampers  the  majority  of  those  engaged  in 
industry  and  hinders  free  competition  in  exchange. 

The  tariff  system  as  a  means  of  raising  revenue  does  not 
conform  to  any  recognized  canon  of  taxation.  It  does 
not  purport  to  tax  men  according  to  their  ability,  whether 
this  be  ability  to  produce  or  ability  to  pay;  it  does  not 
tax  men  in  proportion  to  the  revenues  respectively  enjoyed 
by  them  under  the  protection  of  the  State,  as  Adam  Smith 


274:  BISOCIALJSM— POLITICAL  ECONOMY 

in  his  canon  said,  nor  according  to  the  benefits  respectively 
enjoyed  by  them  under  the  protection  of  the  State,  as  he 
doubtless  meant;  and  it  goes  without  saying  that  the 
tariff  system  is  contrary  to  every  element  of  the  true  canon 
of  taxation  as  we  have  stated  it  heretofore. 

It  is  doubtful  if  a  tariff  system  could  long  survive  in  any 
enlightened  country  were  it  not  for  the  fact  that  it  is  re- 
inforced by  the  doctrine  of  so-called  protection  to  home 
industry.  This  doctrine,  like  the  tariff  system  which  it 
supports,  has  no  economic  basis  whatever.  Like  the  tariff, 
it  violates  every  condition  of  the  economic  imperative,  and 
conforms  to  no  canon  of  taxation.  It  is  simply  an  appeal 
to  selfishness.  To  the  few  its  selfish  appeal  is  true ;  to  the 
many  it  is  false.  A  protective  tariff  has  its  beneficiaries; 
it  is  a  differential  privilege  by  virtue  of  which  some  men 
acquire  and  retain  differential  net  values  through  the  shut- 
ting out,  in  their  particular  businesses,  of  normal  compe- 
tition. These  men  are  truly  protected,  if  a  differential 
privilege  may  be  called  protection. 

The  laboring  man,  it  is  said,  is  protected  from  the  pau- 
per labor  of  Europe.  Yet  wages  in  America  are  constantly 
tending  to  the  European  standard.  If  the  American  la- 
borer would  successfully  combat  this  tendency  and  im- 
prove his  condition,  let  him  seek  protection  from  laws 
which  give  differential  privileges  to  some  of  his  fellow 
countrymen,  and  not  allow  himself  to  be  deluded  with  the 
idea  that  he  needs  protection  from  other  laborers  much 
worse  off  than  himself  and  3,000  miles  away.  After  all 
it  is  better  to  compete  with  the  products  of  foreign  laborers 
and  allow  the  laborers  themselves  to  remain  in  Europe, 


OF  THE  ESTABLISHED  ORDER  275 

than  to  force  them  to  come  to  America  and,  with  their 
low  standard  of  living,  to  compete  with  the  American 
laborer  upon  his  own  ground.  Selfishness  may  easily  over- 
reach itself. 

The  selfishness  involved  in  the  protective  system  has 
also  a  national  aspect.  It  has  long  been  thought  that  in 
order  for  one  nation  to  become  rich  other  nations  must 
become  poor.  This  sentiment  has  often  been  expressed, 
and  is  often  followed,  but  never  with  success.  For 
twenty  years  Cato,  the  censor,  after  speaking  to  the  Roman 
senate  upon  any  subject,  did  not  resume  his  seat  without 
saying,  "It  is  my  opinion,  fathers,  that  Carthage  must 
be  destroyed !"  And  in  the  destruction  of  Carthage  as 
a  competitor  began  the  economic  downfall  of  Eome.  Free 
from  commercial  competition  she  no  longer  depended  upon 
the  laws  of  industry  and  trade  for  her  sustenance,  but 
became  a  plunderer  of  nations,  and  so  was  lost  to  herself 
and  to  the  world. 

As  with  Rome,  so  with  all  other  nations  which  seek  to 
prosper  at  the  expense  of  competing  nations  by  the 
elimination  either  of  the  nations  themselves  or  of  com- 
petition with  them  to  their  detriment.  It  is  an  inexorable 
law  of  the  physical  world  that  action  and  reaction  are 
equal  and  opposite  in  direction,  and  the  same  is  true  in 
the  world  of  industry  and  exchange.  Any  limitation  placed 
by  one  nation  upon  trade  to  the  detriment  of  another 
must  necessarily  react  upon  itself  to  the  same  degree.  In 
our  study  of  the  market  we  found  that  in  a  fair  exchange 
both  buyer  and  seller  may  gain,  and  that  in  normal  con- 
ditions a  gain  either  in  net  salvage  or  in  net  value  inures 


276  BISOCIALISM— POLITICAL  ECONOMY 

to  them  both.  In  international  trade  the  same  principle 
applies,  and  all  trade  restrictions  are  as  much  to  be  de- 
plored between  nations  as  between  individuals.  The  doc- 
trines of  the  standard  economists  concerning  favorable  and 
unfavorable  balances  between  nations  are  economically 
without  foundation.  A  nation  which  imports  more  than 
it  exports  is  not  injured  by  its  foreign  trade,  but  is  bene- 
fited by  it.  Any  attempt  upon  its  part  to  limit  its  im- 
portations by  tariff  laws  or  otherwise  will  certainly  react 
upon  itself.  In  building  a  nation  the  economic  law  of 
gravity  can  not  be  violated  or  ignored  any  more  than  can 
the  law  of  gravity  of  the  physical  world  in  building  a 
tower.  The  doctrines  of  so-called  favorable  and  unfavor- 
able balances  of  trade  are  based  upon  the  erroneous  theory 
of  the  omnisoeialists  that  in  every  exchange  what  one 
party  gains  another  must  necessarily  lose. 

In  the  last  analysis  there  are  but  two  classes  of  things 
which  may  be  taxed :  labor-power  and  its  products  (includ- 
ing capital-forms)  upon  the  one  hand,  and  land-forms 
with  their  natural  opportunities,  upon  the  other.  Under 
a  system  of  private  ownership  of  property  such  as  the 
established  order  maintains,  a  tax  upon  the  former  class 
of  things  is  a  direct  tax  upon  labor-power ;  upon  the  latter 
class,  it  is  a  tax  upon  privilege.  In  present  conditions, 
nearly  all  taxes  fall  directly  or  indirectly  upon  labor- 
power. 

The  established  order  is  based  ostensibly  upon  the  com- 
petitive system,  and  in  former  times  competition  had  rela- 
tively free  play.     Men  then  expended  their  energies  in 


OF  THE  ESTABLISHED  ORDER  377 

cheapening  production  so  as  to  undersell  their  competitors, 
and  in  the  play  and  interplay  of  economic  forces  the  gen- 
eral public  was  provided  with  satisforms  substantially  at 
their  marginal  cost.  There  was  a  large  socialization  of 
utility.  But  in  present  conditions,  the  effort  is  not  so 
much  to  undersell  the  competitor  as  to  eliminate  him  and 
his  wares  from  the  market.  "Wliat  is  sought  is  not  simply 
a  cheaper  process  of  production,  but  a  differential  privi- 
lege which,  in  spite  of  the  cheaper  process,  will  allow  the 
maintenance  of  the  former  price  and  even  an  increase  of 
price.  Those  who  are  able  to  acquire  differential  privi- 
leges in  the  form  of  monopolies  or  franchises,  or  both,  are 
freed  from  competition,  or  at  least  from  its  full  force, 
while  those  who  have  no  such  privileges  are  driven  to  a 
more  desperate  strife  among  themselves,  the  result  being  in 
many  cases  literally  a  life  and  death  struggle.  But  let  it 
be  borne  in  mind  that  such  conditions  are  not  the  fruits 
of  competition,  but  of  the  lack  of  competition  engendered 
by  differential  privileges  granted  to  some  persons  by  the 
State  and  enjoyed  by  them  at  the  expense  of  their  busi- 
ness competitors  and  of  the  general  public,  under  the  sanc- 
tion of  the  law. 

From  an  economic  point  of  view  the  established  order  is 
an  incongruous  mixture.  Its  laws  purposely  interfere 
with  the  natural  laws  of  the  market ;  with  reference  to  the 
institution  of  property,  its  govemmentalism  is  so  in- 
equitable that  it  incites  anarchy;  while  its  individualism- 
is  so  indefinite  and  its  socialism  so  sporadic  that  its  law- 
makers are  without  economic  guidance,  and  its  statesmen 


278  BISOCIALISM— POLITICAL   ECONOMY 

without  economic  conceptions  beyond  the  maintenance  of 
the  status  quo. 

The  Established  Order  is  that  incongruous  admixture 
of  indefinite  individualism  and  sporadic  socialism  which 
seeks  substantially  to  maintain  the  status  quo  with  refer- 
ence to  the  institution  of  property. 


CHAPTER  VII. 

OF   OMNISOCIALISM. 

If  false,  let  them  be  rejected;  but  no  one  has  a  right  to 
entertain  a  prejudice  against  them  merely  because  they  are 
out  of  the  common  road.  David  Hume. 

Omnisocialism  contemplates  a  complete  readjustment 
of  society,  with  a  more  just  and  equitable  distribution  not 
only  of  property,  but  also  of  the  tasks  by  which  property 
is  produced.  It  condemns  the  established  order  in  un- 
measured terms,  and  sets  itself  especially  against  what  it 
calls  the  capitalistic  system  of  production.  It  condemns 
competition  without  reserve,  and  avers  that  commercialism 
is  without  a  redeeming  feature.  It  alleges  that  the  pri- 
vate ownership  of  the  means  of  production  and  distribu- 
tion, with  its  necessary  concomitant,  the  wage  system,  is 
but  a  means  for  the  exploitation  of  the  labor  of  the  many 
for  the  benefit  of  a  favored  few.  It  proposes  to  abolish 
this  exploitation  by  destroying  private  capitalism,  private 
commercialism,  and  the  private  employment  of  one  man 
by  another.  It  proposes  to  abolish  the  payment  of  wages, 
the  payment  of  rent  and  the  payment  of  interest;  the 
making  of  private  profit ;  the  buying  and  selling  of  prop- 
erty as  between  individuals,  and  the  use  of  money  as  a 
medium  of  private  exchange.  Under  omnisocialism  all 
productive  land-forms  and  all  capital-forms  would  belong 
to   the   State;   only   satisforms   and  non-productive  land- 

279 


280  BISOCIALISM— POLITICAL  ECONOMY 

forms  could  become  private  property,  and  these  only  by 
purchase  from  the  State. 

The  advocates  of  omnisocialism  are  adepts  in  pointing 
out  the  weaknesses  and  inconsistencies  of  the  established 
order;  they  are  quick  to  condemn  its  abuses,  and  are  sin- 
cere in  their  attempts  to  correct  them.  Their  ideals  are 
very  high.  In  their  generalizations  regarding  the  system 
which  they  would  substitute  for  the  established  order  they 
are  reasonably  clear  and  are  substantially  of  one  accord.  In 
the  elaboration  of  a  practical  working  plan,  however,  there 
is  much  confusion  among  them,  and  it  is  difficult  to  find 
any  two  of  these  advocates  who  agree  upon  any  consider- 
able number  of  details.  In  abolishing  the  open  market 
they  destroy  the  natural  basis  of  all  economic  phenomena 
and  put  their  proposed  system  at  once  upon  an  artificial 
footing.  There  is  no  economic  reason  why  men,  in  normal 
conditions,  should  not  exchange  the  products  of  their  labor, 
and  heretofore  the  commercial  exchanges  of  every  nation 
have  furnished  a  fair  index  to  its  civilization;  and,  so  fax 
as  they  have  been  unhampered,  commercial  exchanges  have 
furnished  an  automatic  system  for  the  distribution  of 
labor  products.  But  under  omnisocialism  a  means  of  dis- 
tribution must  be  found  other  than  through  the  compe- 
tition of  the  market. 

According  to  writers  of  repute,  if  omnisocialism  were 
substituted  for  the  established  order,  all  workers  would  be 
employed  in  the  putriic  service  and  woula  be  paid  in  lal. 
certificates,  or  labor-time  cnecks,  showing  t>ie  number  oi 
hours,  days,  weeks  or  months  of  service  performed. 

In  order  to  prevent  "soldiering,"  a  worker's  checks  would 


OF   OMNISOCIALISM  281 

not  be  paid  to  him  on  the  basis  of  the  time  actually  put  in 
by  him  in  performing  a  given  task  or  in  achieving  a  given 
result,  but  on  the  basis  of  the  time  necessarily  spent  by 
the  average  worker  in  that  behalf.  This  necessary  average 
time  is  called  the  time  socially  necessary  to  achieve  the 
given  result,  and  the  checks  proposed  to  be  given  in  pay- 
ment are  said  to  represent  social  labor-time.  These  labor- 
time  checks  would  be  legal  tender  at  the  public  stores  for 
labor-forms  of  every  kind.  The  price  of  a  given  labor- 
form  would  be  marked  upon  it  at  the  store  according  to 
the  social  labor-time  requisite  to  its  production.  The  pur- 
chaser would  deliver  to  the  public  store  clerk  such  part  of 
his  labor-time  checks  as  were  equivalent  to  the  labor-time 
represented  by  the  price  of  the  labor-form  purchased.  In 
this  way  labor-forms  would  sell,  it  is  said,  at  the  labor  cost 
of  their  production  plus  a  certain  fixed  percentage  for  the 
payment  of  a  proportional  share  of  necessary  public  ex- 
penditures. In  this  method  all  individual  competition 
and  all  private  profits  would  be  eliminated.  Instead  of 
maintaining  an  economic  system  which  permits  and  pro- 
tects full  and  voluntary  cooperation  in  industry  and  free 
and  voluntary  competition  in  exchange,  omnisocialism 
would  prevent,  directly  or  indirectly,  the  voluntary  co- 
operation of  individuals  in  private  industry,  and  would 
prevent  any  and  all  competition  in  exchange. 

In  the  program  of  omnisocialism  there  is  no  recognition 
of  the  economic  margin;  there  is  no  possibility  of  a  mar- 
ginal pair.  Value  as  we  have  defined  it,  and  as  we  now 
commonly  use  the  term,  would  be  unknown.  Price  would 
pxiippr^.  to  represent  only  the  cost  of  production  plus  a 


282  BISOCIALISM— POLITICAL  ECONOMY 

proportional  share  of  the  cost  of  maintaining  the  State; 
in  fact,  it  would  represent  only  the  estimate  of  some  per- 
son or  committee  as  to  the  cost  of  production,  for  in  the 
absence  of  a  market  which  automatically  measures  disutili- 
ties, any  precise  or  Just  measurement  of  such  cost  is  im- 
possible. 

The  working  plan  of  onmisocialism  makes  no  positive 
distinction  between  the  bounties  of  nature  and  the  prod- 
ucts of  labor.  It  utterly  fails  to  recognize  the  peculiar 
significance  of  the  land-form  in  the  economy  of  the  State. 
Land-forms  are  not  produced  by  labor-power,  and  so  can 
have  no  labor  cost.  They  can  not  be  sold  at  the  cost  of 
production  nor  rented  upon  that  basis.  Xor  can  all  men 
occupy  land-forms  of  equal  desirability  under  socialism 
any  more  than  under  the  established  order.  Onmisocial- 
ism takes  no  account  of  land  values.  It  ignores  ground 
rent  and  affords  no  measurement  of  ground  value.  The 
parceling  out  of  land-forms  is  left  to  take  care  of  itself 
under  some  form  of  arbitrary  selection  and  apportionment 
to  be  made  by  those  in  authority. 

Inasmuch  as  the  State  would  be  the  sole  proprietor  in  all 
forms  of  industry  and  exchange  and  the  sole  owner  of  all 
the  means  of  production,  including  land-forms  put  to  pro- 
ductive uses,  the  question  of  the  relative  desirability  of 
such  land-forms  could  be  settled  without  reference  to  any 
price  put  upon  them.  No  private  person  would  want  to 
buy  a  productive  land-form,  and  he  could  not  do  so,  if 
he  would.  But  with  land-forms  used  for  residence  pur- 
poses it  would  be  different.  Even  though  all  houses  might 
be  equally  well  constructed  and  might  in  every  way  be 


OF   OMNISOCIALISM  283 

equally  desirable  in  themselves,  they  could  not  be  equally 
well  situated.  All  houses  could  not  front  upon  the  public 
parks,  nor  could  all  the  streets  be  boulevards  devoted  to 
pleasure  riding.  Either  the  more  desirable  locations  would 
be  appropriated  by  those  in  power,  or  they  would  be  par- 
celed out  in  some  arbitrary  manner,  or  they  would  be 
rented  under  a  competitive  system.  It  is  one  of  the  car- 
dinal doctrines  of  omnisocialism,  however,  that  rent  shall 
be  abolished.  Some  writers  are  willing  to  admit  that 
enough  rent  might  be  accepted  by  the  State  to  keep  the 
respective  premises  in  repair.  But  if  competition  should 
arise  for  a  given  property  in  which  a  hundred  persons 
should  be  willing  to  pay  such  a  rent,  how  should  the  mat- 
ter be  settled  among  them,  if  their  bids  all  exceeded  the 
sum  necessary  for  repairs? 

Again,  if  the  State  should  accept  rent  in  any  case,  it 
could  only  be  paid  in  labor,  labor-forms  or  labor-time 
checks.  As  the  State  would  already  be  entitled  to  the 
labor  of  every  man  and  to  all  labor-forms  when  first  pro- 
duced, the  collection  of  any  amount  of  rent  in  labor  or 
labor-forms  would  be  but  the  State  receiving  its  own. 
While  if  it  were  attempted  to  collect  rent  in  the  form  of 
labor-time  checks  the  State  would  be  compelled  in  some 
way  to  fix  the  rental  price  of  land-forms  in  terms  of  labor- 
time  checks,  although  land-forms  can  not  be  produced  by 
labor-power.  And  after  the  State  had  received  these  time 
checks  what  could  it  do  with  them  ?  It  would  have  no  need 
of  them  for  revenue,  since  all  labor-forms  when  first  pro- 
duced would  be  its  property,  and  could  be  devoted  to  pub- 
lic uses  so  far  as  necessary  instead  of  being  offered  for  sale. 


284  BISOCIALISM— POLITICAL   ECONOMY 

It  may  be  said  that  matters  of  this  kind  might  be  equal- 
ized by  putting  the  poorest  houses  upon  the  best  land- 
forms  and  vice  versa,  but  this  is  so  contrary  to  human 
desire  and  to  the  fitness  of  things  that  it  would  scarcely 
be  adopted. 

Judged  by  the  economic  imperative,  omnisocialism  is 
entirely  without  warrant.  Under  this  system  the  State, 
instead  of  granting  monopolies  to  certain  of  its  citizens, 
would  itself  become  a  giant  monopolist  and,  as  such,  would 
have  absolute  control  over  all  the  means  of  life.  The  mod- 
icum of  private  ownershij)  allowed,  being  limited  wholly 
to  satisforms  and  non-productive  land-forms,  would  be  a 
mockery  to  a  people  nominally  free.  There  would  be  no 
possibility  of  self-employment.  The  fact  that  the  oppor- 
tunities for  self-employment  are  fast  disappearing  in  the 
established  order  is  one  of  the  greatest  factors  working 
toward  the  downfall  of  the  present  economic  regime;  and 
yet  omnisocialism,  with  its  absolute  denial  of  self-employ- 
ment in  production  is  advocated  as  the  remedy.  The  es- 
tablished order  is  doomed  and  will  be  superseded  by  a  form 
of  systemic  socialism — there  is  no  other  recourse  except 
anarchy — but  if  men  are  to  be  economically  free,  the  estab- 
lished order  must  necessarily  be  superseded  by  socialism 
with  an  open  door.  The  individual  must  be  left  free  to 
employ  himself  and  to  do  as  he  will  with  the  fruits  of  his 
labor,  or  he  will  become  a  more  abject  slave  under  social- 
ism than  he  is  under  the  present  order.  It  will  avail  him 
nothing  to  change  one  master  for  another,  even  though  the 
latter  should  be  the  State,  and  even  though  he  should  be 
nominally  free.     The  greatest  despotism  may  exist  under 


OF   OMNISOCIALISM  285 

a  republican  form  of  government^,  and  the  most  abject 
slavery  may  exist  under  socialism  in  the  absence  of  an 
open  door — in  the  absence  of  the  right  and  the  opportunity 
of  self-employment  and  of  exchange. 

American  socialism  of  the  unlimited  type  is  largely 
based  upon  the  teachings  of  Karl  Marx.  His  arraignment 
of  the  established  order  and  his  advocacy  of  socialism  as  a 
remedy  both  follow  from  a  critical  study  of  the  English 
factory  system  of  the  middle  of  the  last  century.  In  1836 
IST.  W.  Senior^  a  professor  of  Political  Economy  at  Oxford, 
gave  to  the  world  that  remarkable  defense  of  the  estab- 
lished order  contained  in  his  theory  of  the  *^last  hour." 
The  average  working  day  in  the  cotton  factories  at  Man- 
chester at  that  time  was  eleven  and  a  half  hours,  this  being 
the  maximum  then  allowed  by  law.  Senior  attempted  to 
demonstrate  that  all  the  net  profit  of  the  manufacturer 
was  obtained  from  the  work  performed  in  the  last  hour 
of  the  day,  all  of  the  work  of  the  other  hours  going  to  pay 
wages  and  other  current  expenses,  to  reimburse  the  original 
outlay,  and  to  recoup  losses  from  deterioration.  He  ar- 
gued, therefore,  if  the  agitation  for  a  shorter  working 
day  then  rife  in  England  should  succeed  and  the  working 
day  be  reduced  to  ten  hours,  as  was  then  proposed,  not 
only  the  net  profit,  but  even  the  gross  profit  of  manufactur- 
ing would  be  lost  and  all  manufacturing  must  necessarily 
cease.  We  need  not  examine  the  so-called  analysis  by 
which  he  reached  this  startling  conclusion  inasmuch  as 
the  reduction  of  the  hours  of  labor  to  ten  hours  did  not 
produce  a  cessation  of  all  manufacturing  as  he  predicted ; 
nor  has  the  eight-hours  day  now  in  vogue  in  many  lines  of 


286  BISOCIALISM— POUTICAL   ECONOMY 

work  produced  any  such  effect.  This  doctrine  of  the  'last 
hour"  is  mentioned  because  it  gave  direction  to  the  inquiry 
of  Karl  Marx  thirty  years  later. 

Marx'  system  of  socialism  is  based  upon  the  claim  made 
by  him  that  of  the  labor  performed  each  day  by  an  em- 
ploye, a  certain  amount,  which  may  be  indicated  by  the 
line  A B,  is  necessary  to  provide  the  la- 
borer with  a  bare  living  and  to  sustain  those  im- 
mediately dependent  upon  him  for  support.  The  re- 
mainder of  the  day's  labor,  which  may  be  indicated 
by   continuing  the   line    aforesaid   from    B    to   C,   thus, 

A B C,  Marx  calls  the  surplus 

product,  or  surplus  value,  of  the  day's  labor.  This  surplus 
product  he  claims  should,  in  the  nature  of  things,  go  to 
the  laborer,  and  that  he  alone  should  enjoy  the  whole  prod- 
uct. He  further  maintains  that  in  the  early  stage  of 
manufacture  when  things  were  really  "made  by  hand,"  or 
by  simple  tools  in  the  hands  of  workers  who  produced  on 
their  own  account  and  owned  their  own  tools,  the  entire 
product  did  belong  to  the  actual  producer,  and  was  actu- 
ally enjoyed  by  him.  In  those  days  every  person  em- 
ployed in  industry  or  exchange,  after  serving  such  an 
apprenticeship  as  would  fit  him  for  the  business,  might 
!^et  up  for  himself  and  in  his  turn  might  become  an  em- 
ployer of  apprentices.  Manufacture  was  then  carried  on 
in  the  home  or  in  a  small  shop  where  master  and  man 
worked  side  by  side  at  the  same  tasks  and  on  a  plane  of 
substantial  equality.  The  deserving  apprentice  might  well 
hope  to  marry  the  daughter  of  his  employer  and  ultimately 
to  succeed  to  the  business  which  he  had  helped  to  create. 


OP    OMNISOCIALISM  287 

Such  were  the  days  before  the  introduction  of  the  factory 
system. 

With  the  advent  and  development  of  this  system,  how- 
ever, all  was  changed.  The  factory  superseded  the  home 
work  and  eliminated  the  small  shop.  The  machine,  in- 
tricate and  expensive,  took  the  place  of  the  simple  and 
inexpensive  tool.  The  employer  was  also  the  owner  of 
the  machinery',  and  instead  of  working  with  his  men,  set 
a  foreman  over  them  and  secluded  himself  in  a  counting 
room  or  an  office.  He  no  longer  lived  among  his  laborers 
nor  sheltered  his  apprentices  beneath  his  roof.  Between 
the  worthy  apprentice  and  the  daughter  of  the  employer 
a  great  gulf  became  fixed  so  that  he  might  not,  with 
propriety,  even  speak  to  her.  Although  the  surplus  prod- 
uct became  more  and  more  enlarged,  only  that  part  indi- 
cated by  the  line  A B  was  received  and  en- 
joyed by  the  man  whose  labor-power  was  necessary  to 
bring  the  entire  product  into  being. 

It  is  no  longer  necessary  to  use  the  past  tense  in  de- 
scribing conditions  which  have  grown  up  under  the  fac- 
tory system.  To-day  laboring  men,  as  a  class,  in  all  voca- 
tions receive  and  enjoy  but  a  bare  living  according  to  the 
accepted  standards  of  life  in  their  respective  communities. 
In  every  country  with  increase  of  population  and  the  con- 
centration of  the  means  of  life  in  the  hands  of  a  few,  the 
standard  of  living  has  been  or  is  being  forced  down  to  a 
point  which  will  barely  sustain  life  and  enough  physical 
strength  to  enable  the  laborers,  as  a  class,  to  continue  to 
exist.  The  line  A B  tends  everywhere  to  be- 
come shorter  and  shorter,  while  the  line  B C 


288  BISOCIALISM— POLITICAL   ECONOMY 

in  the  entire  line  A B C  tends 

all  the  while  to  become,  relatively  at  least,  longer  and 
longer. 

That  the  term  relatively  is  used  advisedly  in  this  con- 
nection may  be  seen  from  the  following  illustration :  Sup- 
pose that  the  entire  line  A C 

represents  the  full  product  of  a  day's  labor  at  any  given 
time  and  place;  and  suppose  further  that  the  length  of 
the  working  day  at  such  time  is  twelve  hours,  and 
that  six  hours'  labor  each  day  is  necessary  to  sustain 
the  laborer  and  his  dependents  according  to  the  ac- 
cepted standard,  and  that  he  receives  one-half  of  the  prod- 
uct as  his  wages.  Suppose  now  that  in  the  course  of 
five  years  from  such  date  the  competition  of  laborers 
from  other  lands  where  a  lower  standard  of  living 
has  long  existed  has  forced  down  the  wages  and,  con- 
sequently, the  standard,  until  both  are  represented  by 
the  product  of  five  hours'  labor.     Then  the  line  which 

at  first  was  A B C  is  changed  to 

A B 'C,  the  part  of  the  product 

going  to  laborer  and  capitalist,  respectively,  changing  from 
the  ratio  of  6  to  6  to  the  ratio  of  5  to  7.  And  suppose, 
further,  that  by  combination,  as  members  of  a  labor  union, 
the  workers  have  compelled  the  granting  of  a  ten-hours  day 
at  the  expiration  of  the  five  years.  The  net  result  is  that 
although  the  laborers  are  no  worse  off  relatively,  both 
laborer  and  employer  receiving  the  product  of  five  hours' 
labor,  yet  the  laborer  now  lives  upon  five-sixths  of  his 
former  compensation;  and  if  wages  were  forced  down  so 
that  the  ratio  for  a  twelve-hours  day  was  4  to  8,  the  reduc- 


OF   OMNISOCIALISM  289 

ti'on  of  the  number  of  working  hours  from  twelve  to  ten 
would  leave  the  new  ratio  4  to  6  which  would  leave  the 
worker  not  only  absolutely,  but  relatively  worse  off  than  at 
first  when  the  ratio  was  G  to  6. 

The  teaching  of  Karl  Marx,  therefore,  is  to  the  effect 
that  the  laborer  is  exploited  by  the  capitalist  of  all  of  the 
product  of  his  labor  except  a  bare  living  according  to  the 
accepted  standard  of  his  country  and  generation;  that  by 
simply  shortening  the  hours  of  labor  no  permanent  bene- 
fit will  result  to  the  laborers ;  and  that  since,  in  his  view, 
the  laborer  is  entitled  to  all  that  he  produces  instead  of  but 
a  part  of  it,  the  only  complete  remedy  is  to  stop  the  possi- 
bility of  the  exploitation  by  one  man  of  the  labor-power 
of  another.  This,  he  contends,  can  be  done  only  by  the 
complete  destruction  of  the  present  commercial,  or  com- 
petitive system,  and  by  the  substitution  for  it  of  a  com- 
monwealth based  entirely  upon  cooperative  effort.  Under 
the  established  order,  say  Marx  and  his  followers,  those 
who  produce  the  foodstuffs  of  the  world  eat  but  little  of  it; 
those  who  build  mansions  live  in  hovels;  those  who  make 
fine  garments  wear  the  cheapest  clothing;  the  families 
of  those  who  mine  coal  are  scarcely  able  to  buy  it,  even  at 
cost  at  the  mouth  of  the  mine ;  and  socialists  have  the  sup- 
port of  one  of  the  world's  great  captains  of  industry  in 
saying  that,  generally  speaking,  the  man  who  works  never 
gets  rich. 

The  arraignment  of  the  established  order  by  the  social- 
ists is  terrible,  and  terrible  'tis,  'tis  mainly  true.  But 
the  remedy !  Does  not  the  remedy  proposed  by  the  omni- 
socialist  give  a  counter-shock  that  should  make  us  pause? 


290  BISOCIALISM— POLITICAL   ECONOMY 

Granted  that  the  evils  of  the  established  order  are  great 
' — as  great  as  they  are  protrayed;  granted  further  that 
these  evils  are  fundamental,  and  that  fundamental  changes 
are  necessary  to  their  removal ;  granting  all  this  and  more, 
is  it  necessary  that  society  shall  completely  abandon  com- 
merce which  has  carried  such  civilization  as  we  have  at- 
tained to  the  uttermost  parts  of  the  earth ;  that  it  shall 
entirely  take  away  from  the  individual  the  limited  freedom 
which  he  now  enjoys  to  produce  as  he  will  and  to  exchange 
where  he  may;  that  it  shall  become  the  sole  dispenser 
of  all  the  means  of  life,  the  ultimate  determiner  of  every 
man's  employment,  and  the  absolute  controller  of  the 
destiny  of  every  human  being?  Admitting  that  coopera- 
tion and  not  destructive  competition  should  form  the 
basis  of  social  life,  is  it  not  true  that  under  omnisocialism 
the  form  which  the  cooperation  of  the  individual  would 
take  would  be  compulsory  from  the  cradle  to  the  grave? 
And  is  it  not  true,  also,  that  cooperation,  the  form  and 
extent  of  which  depends  ultimately  upon  the  will  of  an- 
other, or  even  upon  the  will  of  the  majority,  is  but  slavery 
in  disguise? 

Were  it  not  for  that  phase  of  the  market  demonstrated 
in  the  foregoing  pages  by  virtue  of  which,  in  normal 
conditions,  an  exchange  of  products  results  in  net  salvage 
to  the  buyer  as  well  as  in  net  value  to  the  seller,  the  whole- 
sale condemnation  by  the  omnisocialist  of  competition 
would  be  justified.  We  have  seen  that  in  every  economic 
exchange  the  utility  of  the  thing  sold  and  the  utility  of 
the  price  thereof  are  both  measured  at  the  point  of  ex- 
change.    The  utility  lying  between  the  point  of  positive 


OF   OMNISOCIALISM  291 

utility  and  the  point  of  exchange  being  the  gain  of  the 
seller,  and  that  lying  between  the  point  of  exchange  and 
the  point  of  alternative  cost  being  the  saving  of  the 
buyer.  This  gain  upon  the  one  hand  and  saving  upon 
the  other  are  measured  by  the  same  unit,  and  are  inter- 
convertible in  terms  of  money.  In  an  exchange  between 
men  having  equal  opportunities  to  produce  and  equal  free- 
dom to  trade  there  can  be  no  economic  exploitation.  And 
in  circumstances  where  a  laborer  has  an  unrestricted  op- 
portunity of  self-emplo}Tiient  upon  a  normal  economic 
margin,  no  employer  can  despoil  him  'of  any  part  of  the 
product  which  is  distinctively  his. 

This  is  the  answer  of  Economic  Science  to  the  omniso- 
cialist.  His  perception  of  present  day  evils  is  unexcelled ; 
his  purpose  is  beyond  reproach ;  his  ideals  are  above  criti- 
cism; but  for  want  of  sufficient  analysis  'of  the  laws  of 
the  market  he  confuses  monopoly  with  capital,  and  differ- 
ential privilege  with  competition.  He  consequently  mis- 
takes the  remedy.  Bisocialism,  on  the  other  hand,  fur- 
nishes a  remedy  which,  by  destroying  monopoly,  and 
socializing  all  those  things  which  under  private  ownership 
and  control  give  rise  to  differential  privileges,  affords 
equality  of  opportunity,  the  retention  of  the  market,  and 
the  extension,  not  the  destruction,  of  individual  freedom. 

ISTotwithstanding  the  defects  in  both  the  theory  and  the 
working  plan  of  omnisocialism,  its  ideals  are  so  high  that 
any  propagation  of  its  doctrines,  or  any  attempt  to  put 
them  into  operation,  must  result  in  good.  The  working 
plan  which  it  would  necessarily  evolve  would  doubtless 
be  a  marked  improvement  over  that  incongruous  cmbodi- 


292  BISOCIALISM— POLITICAL   ECONOMY 

ir.ent  of  truth  and  error  maintained  by  the  established 
order.  And  best  of  all,  the  recognition  of  its  defects  as 
they  would  inevitably  appear  could  not  turn  the  tide  of 
human  progress  back  to  the  present  system,  but  would 
necessarily  lead  to  the  substitution  of  the  less  drastic 
changes  and  more  efficient  working  plan  proposed  by 
bisocialism. 

From  the  discussions  of  this  chapter  we  may  formulate 
the  following  definition  of  omnisocialism : 

Omnisocialism  is  that  form  of  systemic  socialism  which 
seeks  completely  to  overthrow  the  existing  systems  of  in- 
duEjtry  and  exchange,  to  establish  and  maintain  in  their 
stead  a  cooperative  system  of  production  under  exclusive 
State  ownership,  management  and  control,  and,  so  far  as 
may  be  necessary  to  that  end,  to  socialize  all  forms  of 
property. 


CHAPTER  VIII. 

OF  BISOCIALISM. 

Common  friend  to  you  and  me, 
Nature's  gifts  to  all  are  free. 

Robert  Burns. 

The  man  who  monopolizes  land  monopolizes  the  concen- 
trated values  of  common  progress.  If  these  land  values  were 
taken  by  the  public  and  expended  for  the  common  benefit,  all 
progress,  past  and  present,  would  inure  to  the  benefit  of  the 
whole  people.  John  Z.  White. 

Judged  by  the  economic  imperative,  bisocialism  is  the 
true  remedy  for  all  the  economic  evils  of  the  established 
order.  It  will  destroy  all  monopoly  values;  socialize  all 
ground  values  and  all  public  utility  franchise  values;  in- 
dividualize all  labor  values  and  all  capital  values,  and  it 
will  create  and  maintain  an  economic  system  which  will 
permit  the  fullest  cooperation  in  industry  and  the  freest 
competition  in  exchange. 

It  must  be  remembered  that  the  term  hisocialism  does 
not  imply  the  creation  and  maintenance  of  a  little  social- 
ism here  and  there  throughout  our  present  economic  sys- 
tem, such  as  the  postal  system  and  life-saving  service.  Such 
isolated  and  unrelated  socialistic  features  are  instances 
of  what  we  have  called  sporadic  socialism.  Under  biso- 
cialism such  features  will  be  retained  and  extended,  but 
they  will  become  material  parts  of  a  system  wholly  social- 
igtic  as  far  as  it  goes.     The  system  itself  will  be  limited 

293 


294  BISOCIALISM—POLITICAL    ECONOMY 

by  clear  linos  of  demarcation,  but  within  the  scope  of  the 
sj^stem  there  will  be  no  bounds  placed  upon  the  socialistic 
features.  Those  things  which  are  socialized  at  all  will 
be  completely  socialized,  while  those  which  are  left  to 
individual  control  Anil  be  so  completely  individualized 
that  they  will  not  be  called  upon  even  to  contribute  to 
the  revenues  of  the  State. 

Bisocialism  is  not  an  arbitrary  and  experimental  scheme 
for  the  solution  of  industrial  problems.  Its  working  plan 
is  not  without  an  economic  basis.  It  recognizes  both 
cooperation  and  competition  as  beneficent  agents  of 
progress,  but  it  makes  opportunities  for  the  former  com- 
plete ;  for  the  latter,  free.  It  does  not  destroy  the  market, 
nor  forbid  exchange;  on  the  other  hand,  it  restores  the 
normal  market  and  completely  unshackles  trade. 

When  all  monopoly  values  have  been  destroyed  and  all 
ground  values  and  public  utility  franchise  values  have 
been  completely  socialized,  industry  will  not  be  forced 
to  exert  itself  below  the  normal  economic  margin.  The 
marginal  return  to  common  labor-power  will  then  become 
the  true  and  unerring  standard  for  the  measurement  of 
all  labor  values.  The  marginal  pair  will  become  the  de- 
terminers of  all  market  values,  and  the  common  laborer 
upon  a  marginal  land-form  will  become  the  unconscious 
but  certain  arbiter  of  all  wage  questions. 

Let  us  assume  that  two  men  of  equal  skill  and  ability 
and  without  any  capital-forms  go  out  together  on  a  cer- 
tain day  and  work  the  same  number  of  hours  at  the  same 
task  upon  equally  fertile  and  well  situated  land-forms. 
At  nightfall  their  day's  products  will  be  substantially  equal 


OF  BISOCIALISM  295 

and,  if  taken  into  the  market  together,  they  will  have 
substantially  equal  values. 

Let  us  assume  that  on  the  second  day  one  of  these  men 
exercises  greater  skill  or  ability  than  the  other,  thus  ex- 
erting superior  labor-power,  all  other  conditions  remain- 
ing the  same.  At  the  close  of  this  day  his  product  will 
exceed  that  of  the  other  man  in  quantity,  and  in  the 
market  will  be  of  correspondingly  greater  value.  This  in- 
( Teased  value  resulting  from  superior  labor-power  we  have 
called  a  labor  differential.  Omnisocialism  would  turn 
both  products  into  the  public  storehouse,  and  reward  both 
laborers  with  time  checks  for  the  same  number  of  hours. 
The  only  additional  recompense  open  to  the  superior  la- 
1)orer  would  be  possible  promotion  to  a  more  desirable 
occupation.  Bisocialism  would  give  this  labor  differential, 
without  reduction  by  taxation  or  otherwise,  to  the  man 
whose  superior  skill  or  ability  caused  it  to  be;  and  it 
would  leave  him  free  to  bring  about  his  own  promotion  to 
a  more  desirable  occupation  in  competition,  and  upon 
equal  terms,  with  his  fellows. 

Again,  let  us  assume  that  on  the  third  day  tlie  same 
man,  in  addition  to  the  exertion  of  superior  labor-power, 
lias  converted  his  excess  of  the  day  before  into  a  capital- 
form  which  he  now-  uses  to  overcome  the  disutility  of  time. 
.\t  the  close  of  the  day  his  product  contains  two  elements 
I  if  differential  value.  He  has  now  a  capital  differential 
as  well  as  a  labor  differential.  Omnisocialism  and  biso- 
cialism would  treat  this  capital  differential  in  the  same 
way  as  they  would  treat  the  labor  differential,  respectively. 


296  BISOCIALISM— POLITICAL   ECONOMY 

the  one  turning  it  into  the  common  store,  and  the  other 
leaving  it  without  diminution  to  the  man  who  created  it. 

The  established  order  purports  to  treat  these  differen- 
tials as  individual  property,  but  its  treatment  differs  from 
that  proposed  by  bisocialism  in  two  respects.  The  estab- 
lished order  takes  from  the  possessor  part  of  his  labor  dif- 
ferential and  part  of  his  capital  differential  in  the  form 
of  taxes,  thus,  in  effect,  fining  him  for  his  industry  in 
the  one  case  and  his  frugality  in  the  other.  And  on  the 
other  hand,  it  would,  in  certain  cases,  grant  him  a  monop- 
oly in  the  use  of  his  capital-form,  as  by  a  patent,  and  thus 
enable  him  to  lay  tribute  upon  his  fellow-worker.  Biso- 
Cialism  would  do  neither  of  these  things. 

Let  us  further  assume  that  on  the  fourth  day  the  same 
man  exerts  his  superior  labor-power,  assisted  by  pure  cap- 
ital, upon  a  superior  land-form,  the  other  man  having 
made  no  changes  whatever.  The  one  now  has  three  dif- 
ferential values  of  product — a  labor  differential,  a  capital 
differential,  and  a  land  differential.  The  established  order 
gives  him  the  land  differential  subject  to  a  slight  diminu- 
tion in  taxation.  Omnisocialism  would  turn  the  entire 
product  itself  into  the  public  storehouse  and  issue  time 
checks  to  both  men  equally.  Bisocialism  would  turn  that 
part  of  the  differential  value  of  the  product  which  re- 
sults from  the  use  of  the  superior  land-form  into  the  public 
treasury  to  be  expended  for  the  common  good ;  thus  treat- 
ing the  superiority  of  the  land-form  as  an  advantage  of 
external  nature  which  all  can  not  occupy,  but  the  dis- 
tinctive values  of  which  all  should  and  may  thus  enjoy 
in  common. 


OF  BISOCIALISM  297 

Let  us  now  assume  that  on  the  fifth  day  the  progressive 
man  in  question  has  acquired  a  franchise  from  a  munici- 
pality by  virtue  of  which  he  uses  a  public  street  for  pri- 
vate gain  and  in  a  manner  not  open  to  any  other  person. 
To  his  net  values  he  has  now  added  a  franchise  differen- 
tial. This  the  established  order  enables  him  to  retain 
practically  without  taxation.  In  both  forms  of  systemic 
socialism  such  business  enterprises  would  be  conducted  by 
the  municipality,  and  public  utility  franchises  in  private 
hands  would  be  unknown;  or,  if  private  ownership  of 
public  utilities  should  be  allowed  under  bisocialism,  the 
differential  values  of  their  franchises  would  be  wholly 
socialized  in  taxation. 

Finally,  let  us  assume  that  on  the  sixth  day  our  man 
of  progress  acquires  and  uses  a  monopoly  upon  some  in- 
strument or  process  of  production  and  in  this  way  secures 
an  artificial  advantage  over  his  fellow-worker.  He  now 
has  a  monopoly  differential  of  product  which  the  estab- 
lished order  enables  him  to  retain.  Under  either  form 
of  systemic  socialism  no  such  differential  could  be  acquired. 

The  five  differentials  which  we  have  enumerated  are 
the  only  differentials  which  it  is  possible  to  create  or 
acquire  under  any  economic  system  whatever.  In  the 
established  order  all  these  differentials  exist  and  all  are 
left  to  private  ownership  subject  to  the  same  restrictions 
in  each  case  as  to  liability  to  taxation.  The  matter  of 
their  origin  is  now  wholly  ignored  by  the  State  in  its  sys- 
tem of  raising  revenue.  In  omnisocialism  the  last  two — 
franchise  and  monopoly  differentials — would  not  arise, 
and  all  the  others  would  be  absorbed  by  the  State  without 


298  BISOCIALISM— POLITICAL   ECONOMY 

distinction  as  to  their  origin.  In  bisocialism  one  class  of 
these  differentials — all  monopoly  diiTerentials — would  be 
abolished,  two  classes — land  differentials  and  franchise 
differentials — would  be  socialized,  and  the  remaining  two 
— labor  differentials  and  capital  differentials — would  be 
left  to  their  individual  creators  without  any  diminution 
whatsoever. 

These  five  differentials  may  be  examined  from  another 
point  of  view.  Labor  differentials  and  capital  differentials 
may  be  created  and  acquired  under  and  by  virtue  of  the 
simple  laws  of  industry  and  exchange,  without  the  neces- 
sity for  any  law  or  action  of  the  State  whatever.  Among 
free  men  labor  has  ever  been  recognized  as  giving  a  nat- 
ural title  to  its  products,  and  capital  is  nothing  but  labor- 
forms  put  to  a  particular  use.  On  the  other  hand,  labor 
can  not  give  a  natural  title  to  a  land-form  which  it  did 
not  create ;  nor  to  a  franchise  nor  to  a  monopoly,  for  these 
are  creations  of  the  State.  In  all  civilized  countries 
land-forms  are  held  under  a  tenure  established  and  up- 
held by  law,  the  source  of  all  land  titles  being  the  sov- 
ereign power  of  the  State.  The  same  is  true  of  all  titles 
based  upon  franchises  and  monopolies.  Such  titles  are 
purely  legal  as  distinguished  from  the  titles  of  labor- 
forms  and  capital-forms  which  have  a  purely  economic 
basis  and  exist  independently  of  the  existence  or  action  of 
a  particular  government  or  State.  Bisocialism  would  in- 
dividualize all  purely  economic  differentials  of  product, 
and  would  either  socialize  or  destroy  all  purely  legal  dif- 
ferentials. 

By   retaining  the   competitive   system   as   exhibited   in 


OP  BISOCIALISM  299 

an  open  and  wholly  unrestricted  market,  bisocialism 
would  give  to  the  people  the  utmost  advantage  of  that 
feature  of  the  market  which  results  in  the  socialization 
of  utility.  The  importance  of  this  feature  as  a  social 
and  economic  factor  can  hardly  be  overestimated.  By  it 
tlie  marginal  seller  of  every  trade-form  must  cater  to  the 
demand  of  the  marginal  buyer.  The  result  is  that  among 
producers  there  is  induced  a  constant  effort  to  acquire 
their  products  with  the  least  possible  disvalue,  and  that 
among  consumers  all  are  enabled  to  buy  at  prices  fixed 
by  those  buyers  who  are  most  indifferent  or  least  capable 
of  all.  In  this  way  society  as  a  whole  is  enabled  to  satisfy 
its  desires  and  the  desires  of  its  members  with  the  least 
exertion. 

In  the  absence  of  all  monopolies  and  with  all  ground 
values  and  all  franchise  values  socialized,  there  would  be 
nothing  in  the  competitive  system  of  industry  and  ex- 
change incompatible  with  the  highest  good  of  any  mem- 
ber of  society.  It  is  true,  as  the  omnisocialists  say,  that 
under  the  established  order  some  men  are  enabled  to  op- 
press and  exploit  their  fellows,  and  that  it  is  possible  for 
a  few  men  to  combine  in  such  manner  as  to  oppress  and 
exploit  the  masses.  But  it  is  also  true  that  the  only  way 
in  which  one  man  may  oppress  or  exploit  another,  or  in 
which  a  combination  of  men  may  oppress  and  exploit  the 
masses  is  by  obtaining  a  differential  advantage  in  the  pos- 
session or  control  of  land-forms,  or  in  the  possession  and 
control  of  public  utility  franchises,  or  of  monopolies.  In 
other  words,  the  only  men  who  can  by  any  possible  means 
(short  of  physical  force  or  intimidation)   oppress  or  ex- 


300  BISOCIALISM— POLITICAL  ECONOMY 

ploit  their  fellows  or  the  masses  are  landlords,  franchise- 
holders,  and  the  beneficiaries  of  monopolies.  When  mo- 
nopolies have  been  destroyed  and  all  franchise  values  and 
ground  values  have  been  taken  out  of  the  possession  and 
control  of  private  individuals  and  thoroughly  socialized,  it 
will  be  an  utter  impossibility  for  any  man  to  oppress 
or  exploit  another  in  any  manner  within  the  reach  of 
any  economic  remedy.  Men  may  still  steal  from  one  an- 
other, and  may  reap  where  they  have  not  sown  by  means 
of  violence,  intimidation,  or  fraud,  but  these  evils  must 
be  remedied  by  the  State  under  its  police  power.  They 
are  not  manifestations  of  any  economic  disease,  and  for 
them  there  is  no  economic  remedy. 

The  economic  "law  of  gravity,"  that  men  everywhere 
tend  to  satisfy  their  desires  with  the  least  exertion — that 
they  seek  a  maximum  of  satisfaction  with  a  minimum 
of  effort — is  completely  recognized  by  the  working  plan 
of  bisocialism.  This  plan  enables  every  man  to  work 
under  the  most  favorable  conditions  possible;  it  gives  no 
man  an  economic  advantage  over  his  fellows;  it  places  no 
restrictions  upon  any  man  except  such  as  are  necessary 
to  give  and  maintain  equality  of  opportunity  to  all  men; 
it  gives  to  every  man  every  value  which  he  distinctively 
creates,  and  every  value  to  which  no  man  can  lay  claim 
as  distinctively  his  own  it  absorbs  into  the  public  treasury 
to  be  expended  for  the  common  good.  It  is  a  cardinal 
doctrine  of  bisocialism  that  the  State  should  enable  every 
man  to  satisfy  his  desires  with  the  least  exertion,  provided 
that  he  does  not  thereby  interfere  with  the  equal  oppor- 


OF  BISOCIALISM  301 

tunity  of  every  other  man  to  do  the  same.  This  is  the 
'law  of  equal  freedom"  of  bisocialism. 

Bisocialism  recognizes  the  true  nature  and  import  of 
the  market  as  manifested  in  value  and  cost.  It  recog- 
nizes the  double  aspect  implied  in  the  definition  of  price, 
and  gives  due  attention  to  both  sides  of  the  market.  It 
looks  upon  the  buyer  (consumer)  rather  than  the  seller 
(producer)  as  the  more  important  person  in  the  market, 
and  makes  consumption  rather  than  production  the  mat- 
ter of  greater  economic  importance.  In  the  established 
order,  the  producer  is  all  in  all.  It  is  always  he  that  is 
"protected"  by  legal  differentials.  It  is  always  the  con- 
sumer who  "pays  the  freight" — protection  and  all.  In 
bisocialism  the  State  will  not  protect  any  man  at  the  ex- 
pense of  another.  It  will  protect  every  man — not  some 
men — but  it  will  be  by  protecting  him  against  any  undue 
advantage  upon  the  part  of  another.  The  law  should 
give  to  all  men  equality  of  opportunity,  and  should  pro- 
tect them  in  the  enjo}Tnent  of  such  equality — that  is  all. 

Under  bisocialism  the  tenure  of  land-forms  would  re- 
main as  at  present  in  form  and  also  in  substance,  except 
that  the  rate  of  annual  taxation  would  be  increased  to 
100  per  cent,  of  the  ground  value.  It  has  been  shown 
in  a  former  chapter  that  under  such  a  system  ground 
values  would  be  reduced  from  substantially  twenty  years' 
purchase — the  aggregate  sum  of  twenty  years'  ground  rent 
— to  the  present  worth  of  one  year's  ground  rent  at  the 
current  rate  of  interest,  and  that  thus  the  ground  value 
or  selling  price  of  a  land-form  would  become  less  than 
its  ground  rent.     Land-forms  could  still  be  held  as  an 


302  BISOCIALISM— POLITICAL   ECONOMY 

iiivestment,  and  would  yield  the  current  rate  of  interest 
upon  secure  investments.  But  other  things  remaining 
equal,  land-forms  would  be  worth  only  about  one-twentieth 
what  they  are  at  present,  and  under  bisocialism  nineteen- 
twentieths  of  the  funds  now  invested  in  land-forms  would 
seek  investment  in  productive  enterprises.  This  would 
give  great  impetus  to  industry  and  exchange.  The  social- 
izing of  ground  values  would  make  speculation  in  land- 
forms  unprofitable  and  impossible,  thus  throwing  all  land- 
forms  open  to  actual  users ;  and  at  the  same  time  it  would 
divert  a  large  fund  from  unproductive  to  productive 
uses.  It  needs  only  to  be  stated  to  be  seen  that  a  farm 
which  now  costs  $20,000  will  produce  just  as  much  grain 
when  the  price  is  reduced  under  bisocialism  to  less  than 
$1,000;  and  that  just  as  much  business  can  be  transacted 
upon  a  corner  lot  when,  under  bisocialism,  the  price  is  sub- 
stantially $1,000  as  when,  in  present  conditions,  its  price 
is  $20,000. 

If  ground  values  were  wholly  socialized  as  proposed,  one 
effect  would  be  to  throw  all  unused  land-forms  into  use, 
as  the  tax  would  be  the  entire  ground  value  whether  used 
or  not.  This  would  tend  still  further  to  lower  the  price 
of  land-forms.  But,  on  the  other  hand,  the  diverting  of 
large  investments  from  idle  and  otherwise  unproductive 
land-holding  into  productive  enterprises  would  cause  a 
great  demand  for  land-forms  upon  which  to  conduct  these 
enterprises,  and  we  may  fairly  assume  that  these  changes 
would  tend  to  establish  an  equilibrium,  and  that  ground 
values  under  bisocialism  would  be  substantially  one-twen- 
tieth as  great  as  at  present. 


OF  BISOCIALISM  oOd 

Aside  from  being  very  greatly  simplified  and  reduced, 
the  machinery  of  taxation  would  remain  as  at  present. 
All  custom  houses  would  be  abolished  and  the  horde  of 
tax-gatherers — customs  officers,  collectors  of  internal  rev- 
enue, gangers,  spies,  inspectors,  and  the  like — now  main- 
tained by  the  general  government  would  be  disbanded. 
The  only  tax  would  be  a  tax  upon  ground  values — irre- 
spective of  the  values  of  improvements — unless  it  should 
be  the  policy  of  the  State  to  permit  public  utilities  to  be 
operated  under  franchises  by  private  persons.  In  this 
case  the  tax  would  be  extended  so  as  to  include  the  entire 
selling  value  of  such  franchises  each  year.  The  selling 
value  of  a  franchise  under  such  conditions  would  be  such 
that  the  annual  net  income  not  only  would  pay  the  cur- 
rent rate  of  interest  on  the  investment  after  the  payment  of 
the  tax  each  year,  but  also  would  reimburse  the  amount  of 
the  investment  itself  within  the  life  of  the  franchise.  The 
selling  values  of  franchises  would  be  computed  from  tables 
of  values  in  much  the  same  way  as  the  values  of  annuities 
are  now  determined.  But  under  a  system  of  bisocialism 
the  logical  plan  is  governmental  or  municipal  ownership, 
operation,  and  control  of  all  public  utilities,  thus  leaving 
ground  values  as  the  single  source  of  governmental  and 
municipal  revenue. 

Under  such  a  working  plan  the  State  would  permit  pri- 
vate ownership  and  private  enterprise  in  all  matters  not 
requiring  a  franchise,  but  would  socialize  all  ground  val- 
ues by  absorbing  them  into  the  public  treasury  by  means 
of  taxation.  Franchise  values,  on  the  other  hand,  would 
be  socialized  by  the  direct  socialism  of  all  those  businesses 


304  BISOCIALISM— POLITICAL   ECONOMY 

under  which  such  values  now  accure.  So  that,  strictly 
speaking,  bisocialism  contemplates  the  socialization  of  one 
kind  of  value — ground  value — and  one  kind  of  business — 
the  business  of  operating  public  utilities.  All  other  values 
and  all  other  businesses  are  to  be  left  to  individual  own- 
ership and  enterprise  free  from  any  and  all  forms  of  taxa- 
tion, and  free  from  all  artificial  restrictions. 

If,  under  a  system  of  bisocialism  it  should  be  deemed 
politic — it  certainly  would  not  be  economic — to  give  to 
authors  and  inventors  such  encouragement  as  the  gov- 
ernment now  attempts  to  give  by  means  of  patents  and 
copyrights,  it  might  be  done  much  more  effectively  than 
at  present,  without  discriminating  against  any  particular 
person  or  class,  and  with  but  slight  discrimination  against 
society  as  a  whole.  The  publishing  of  the  copyrighted 
book  or  the  making  of  the  patented  article  might  be 
thrown  open  to  all,  the  only  condition  being  the  payment 
of  a  given  royalty  to  the  author  or  inventor  for  a  given 
time  by  every  publisher  or  manufacturer  under  such  regu- 
lations as  might  be  necessary  to  protect  the  person  entitled 
to  receive  such  royalty.  This  plan  could  be  adopted  under 
the  established  order  and  would  be  a  vast  improvement 
over  the  present  plan,  which  seldom  results  in  any  sub- 
stantial benefit  to  the  inventor  and  not  always  to  the 
author.  At  any  rate,  all  publishers  and  manufacturers 
should  be  put  upon  the  same  plane,  and  the  differential 
advantages,  if  they  are  to  be  given,  should  be  limited  to 
the  authors  and  inventors  themselves. 

In  this  connection  it  may  be  well  to  note  that  a  similar 
change  might  be  made  under  the  established  order  with 


OF  BISOCIALISM  30.j 

reference  to  the  policy  of  so-called  protection  to  homo 
industry.  In  order  to  have  all  the  advantage  of  the  pro- 
tective system,  so-called,  it  is  not  at  all  necessary  to  have 
a  '^protective  tariff"  as  now  established.  Instead  of 
congress  seeking  to  ascertain  and  to  establish  in  the  case 
of  every  protected  article  a  tariff  rate,  specific,  ad  valorem, 
or  both,  which  will  give  the  desired  '^protection,*'  let  it 
ascertain  and  establish  as  nearly  as  it  can  the  amount  of 
each  foreign  article  which  can  be  imported  into  the  United 
States  without  lowering  the  market  price  to  the  extent  of 
"crippling  home  industry.''  Then  let  it  be  enacted  that 
such  quantity  may  be  imported  annually,  and  no  more, 
and  let  the  privilege  of  such  importation  be  thrown  open 
to  competition,  the  highest  bidder  being  awarded  the  ex- 
clusive privilege  to  import  such  quantity  upon  paying  the 
am'ount  of  his  bid  into  the  pu1)lic  treasury.  This  plan,  like 
the  formulation  of  tariff  schedules  by  exjjerts  and  com- 
mittees in  congress  under  the  present  tariff  system,  is 
purely  arbitrary  and  economically  unjustifiable,  but  it 
would  carry  out  the  protective  theory  to  the  utmost 
extent  and  in  the  simplest  way.  It  would  preserve  the 
competitive  principle  in  so  far  as  it  can  be  preserved 
without  abolishing  the  protective  policy  itself.  It  would 
disassociate  the  protective  policy  from  the  question  of 
taxation,  and  would  place  such  policy  squarely  upon  its 
merits  before  the  people.  Bisocialism  would  ultimately 
discard  such  a  plan  as  contrary  to  the  economic  impera- 
tive, but  under  the  established  order  it  would  work  a  vast 
improvement. 

Bisocialism  would  at  once  adopt  the  economic  standard 


306  BISOCIALISM— POLITICAL   ECONOMY 

of  value,  and  would  use  the  current  credit-form  as  its  basic 
medium  of  exchange.  For  all  labor,  services,  and  labor- 
forms  purchased  by  the  State  it  would  issue  current 
credit-forms  in  terms  of  dailors.  These  dailors  would 
be  redeemed  by  the  State  in  the  payment  of  ground  value 
into  the  public  treasury,  and  meanwhile  would  pass  cur- 
rent anywhere,  at  home  or  abroad,  that  the  stability  of  the 
government  was  recognized.  For  foreign  exchanges  gold 
might  still  be  used,  and  would  pass  then,  as  now,  by  weight 
in  all  transactions  of  importance.  For  domestic  use 
neither  gold  nor  silver  would  be  required  as  a  standard 
of  value,  the  economic  standard  having  no  more  reference 
to  gold  or  silver  than  to  any  other  trade-form ;  but  as  mere 
current  money-forms  gold  and  silver  would  be  retained. 
The  attitude  of  bisocialism  toward  the  economic  standard 
of  value,  the  current  credit-form  as  a  medium  of  exchange, 
and  gold  and  silver  as  current  money-forms  may  be  fully 
ascertained  and  understood  by  reference  to  former  chap- 
ters which  treat  of  those  subjects. 

From  the  discussions  of  this  chapter  we  may  deduce 
the  following  definition  of  bisocialism: 

Bisocialism  is  that  form  of  systemic  socialism  which 
seeks  to  destroy  all  forms  of  monopoly;  to  socialize  all 
ground  values  and  all  public  utilities;  to  establish  and 
maintain  equality  of  opportunity  among  all  men,  and  to 
leave  to  private  ownership,  management,  and  control  all 
of  the  distinctive  results  of  individual  ability,  energy,  and 
thrift 


CHAPTEE  IX. 

OF  EQUALITY  OF  OPPORTUNITY. 

It's  hardly  in  a  body's  pow'r 

To  keep  at  times  frae  being  sour 

To  see  how  things  are  shar'd. 

Ro'bert  Burns. 

Many,  indeed,  fail  with  greater  efforts  than  those  with 
which  others  succeed,  not  from  difference  of  merits,  but 
difference  of  opportunities;  but  if  all  were  done  which  it 
would  be  in  the  power  of  a  good  government  to  do,  by  instruc- 
tion and  by  legislation,  to  diminish  this  inequality  of  oppor- 
tunities, the  difference  of  fortunes  arising  from  people's  own 
earnings  could  not  justly  give  umbrage.      John  Stuart  Mill. 

In  our  analysis  of  the  competitive  system  of  industry 
and  exchange  we  learned  that  from  an  economic  point  of 
view  the  great  desideratum  of  business  life  is  the  acquisi- 
tion of  net  value.  Net  value  lies  between  two  movable 
points,  the  point  of  positive  utility  and  the  point  of  ex- 
change. The  point  of  exchange  remaining  the  same,  any- 
thing which  will  lower  the  point  of  positive  utility  to 
the  individual  producer,  will,  to  that  extent,  increase  his 
net  values;  and  likewise,  the  point  of  positive  utility  re- 
maining the  same,  anything  which  will  raise  the  point 
of  exchange  of  particular  products  will  lead  to  a  cor- 
responding increase  of  net  values  in  the  hands  of  certain 
producers. 

In  the  course  of  the  competitive  system  under  the  estab- 
lished order,  some  men  have  come  to  understand  the  fact 

307 


308  BISOCIALISM— POLITICAL   ECONOMY 

that  an  increase  of  net  value  may  result  from  the 
ability,  energy,  and  thrift  of  the  individual  exerted 
in  a  fair  field,  with  no  detriment  or  disadvantage 
to  his  fellow-man,  or  to  society  as  a  whole;  or  it  may 
result  from  the  individual  appropriation  of  a  land-form 
having  a  superior  advantage  of  fertility  or  of  location,  or 
both;  or  from  a  differential  privilege,  i.  e.,  a  franchise 
or  a  monopoly,  created  and  enforced  by  the  State  for  the 
benefit  of  a  private  individual,  company  or  corporation. 
Stated  in  another  way,  men  have  learned  that,  where 
equality  of  opportunity  prevails,  differential  net  value  can 
be  acquired  only  by  means  of  superior  ability,  energy,  and 
thrift;  but  that  under  the  established  order  it  is  possible 
for  some  men — not  all  men — to  secure  net  values  which 
do  not  result  from  individual  ability,  energy  or  thrift, 
but  depend  upon  the  differential  qualities  of  opportunities 
specially  enjoyed  under  the  law. 

In  an  economic  system  which  creates  and  dispenses 
differential  opportunities  in  industry,  exchange  and  land 
tenure,  it  is  natural  that  men  should  strive  to  become 
the  beneficiaries  of  such  advantages.  Men  are  wont  to 
assume  that  anything  that  is  legally  right  is  economically 
correct;  and  under  a  system  which  encourages  a  struggle 
for  differential  opportunities,  and  rewards  the  successful 
man  with  prominence,  riches  and  honor,  while  condemning 
the  unsuccessful  to  obscurity,  poverty  and  servitude,  many 
men  become  utterly  indifferent  to  questions  of  Economics, 
and  even  of  ethics,  and  aim  only  to  keep  within  the  law 
in  the  acquisition  of  net  values.  The  "captains  of  in- 
dustry'" and  the  "Napoleons  of  finance"  of  the  established 


OF  EQUALITY  OP  OPPORTUNITY  309 

order  have  acquired  their  riches,  prominence  and  power, 
not  by  the  exercise  of  superior  energy,  skill  and  ability 
in  overcoming  the  disutilities  of  matter,  time  and  space 
in  an  open  field,  but  in  acquiring  differential  advantages, 
under  the  law,  over  their  fellow  men. 

If  the  established  order  is  to  continue,  its  glaring  in- 
equalities and  the  sources  of  its  differential  privileges  and 
advantages  can  no  longer  be  concealed.  Political  Economy 
must  come  out  into  the  open  and  discuss  practical  problems 
regarding  the  means  of  acquiring  these  advantages.  The 
young  man  who  is  seeking  a  practical  education  must  be 
shown  that  unless  he  acquires  some  differential  privilege, 
he  can  lower  the  point  of  positive  utility  only  by  the  exer- 
cise of  superior  labor-power  or  by  the  use  of  capital-forms 
in  the  ordinary  manner;  and  that  unless  he  acquires  such 
a  differential  privilege,  he  can  have  no  control  whatever 
over  the  point  of  exchange.  If  the  established  order  fur- 
nished him  a  field  in  which  opportunities  were  equal  and 
open  to  all,  he  might  well  rely  upon  his  own  efforts  for 
success.  But  he  should  be  led  to  understand  that  in  the 
established  order  opportunities  are  not  equal  and  open  to 
all,  and  that  he  must  either  secure  special  advantages  or 
become  the  victim  of  those  who  do. 

Every  man  in  the  United  States  of  America  is  either 
the  beneficiary  of  some  differential  privilege  in  industry, 
exchange,  or  land  tenure,  or  pays  tribute  to  some  other 
person  who  is  such  a  beneficiary.  There  is  no  man  so 
rich  through  his  own  energy,  ability  and  thrift,  that  he 
can  escape  the  toll-gatherers  of  privilege,  and  none  so  poor 
that  by  these  collectors  of  economic  tribute  he  is  not  made 


310  BISOCIALISM— POLITICAL   ECONOMY 

to  suffer.  The  very  poor  all  live  upon  an  artificially  de- 
pressed economic  margin,  and  are  all  despoiled  of  the 
normal  marginal  return.  Theee  have  no  opportunity  to 
recoup  their  losses  or  any  part  thereof,  and  their  spolia- 
tion is  without  mitigation  and  without  recourse.  Above 
the  margin  there  is  a  chance  that  instead  of  being  always 
a  victim  one  may  sometimes  become  a  beneficiary;  but 
there  is  no  neutral  ground.  It  is  one  of  the  greatest  de- 
fects of  the  established  order  that  it  presents  no  way  by 
which  a  man  may  escape  the  blighting  effects  of  its  dif- 
ferential privileges;  no  place  where  he  can  produce  upon 
a  normal  margin;  no  place  where  he  can  be  free  from 
monopoly;  no  place  nor  manner  in  which  he  can  satisfy 
his  own  desires  with  the  least  exertion,  without  inter- 
ference, or  without  interfering  with  the  equal  opportunity 
of  some  other  man  to  do  the  same. 

If  the  established  order  is  economically  right,  then  it 
is  right  to  teach  the  young  to  take  advantage  of  its  in- 
stitutions. If  it  is  economically  wrong,  the  wrong  is  in- 
stitutional, not  personal,  and  institutional  changes  are 
necessary  to  its  reformation.  It  is  useless  to  decry  the 
monopolist  while  maintaining  monopoly;  it  is  useless  to 
attack  the  members  of  a  trust  monopoly  as  long  as  the 
trust  furnishes  the  most  available  legal  method  of  acquir- 
ing differential  values.  To  eliminate  the  monopolist  and 
the  trust  magnate  it  is  necessary  either  to  destroy  or  to 
socialize  all  legal  differentials;  it  is  necessary  to  establish 
equality  of  opportunity.  It  is  not  necessary,  however, 
to  establish  equality  of  personality  or  equality  of  product 
among  those  who  toil. 


OF   EQUALITY  OF  OPPORTUNITY  311 

Equality  of  opportunity  is  just  as  essential  to  the  buyer 
as  to  the  seller — to  the  customer  as  to  the  producer.  In 
the  established  order  the  marginal  consumer  is  artificially 
depressed  to  the  same  extent  as  the  marginal  producer. 
He  has  acquired  his  ability  to  purchase — his  ordinary 
trade-forms  or  their  equivalent  money-forms — upon  an 
abnormally  depressed  economic  margin,  so  that  at  the 
outset  he  is  despoiled  of  the  full  fruition  of  his  labor. 
And  when  he  enters  the  market  with  Ms  scant  supply  of 
money-forms,  he  finds  scarcely  an  article  for  sale  except 
at  a  price  artificially  held  above  the  normal  margin 
through  some  form  of  differential  privilege  in  the  hands 
of  others.  In  buying  sugar  he  pays  tribute  to  the  sugar 
trust;  flour,  to  the  milling  trust;  oil,  to  the  oil  trust; 
fuel,  to  the  coal  trust ;  lumber,  to  the  lumber  trust ;  hard- 
ware, to  the  steel  and  iron  trust;  salt,  to  the  salt  trust; 
clothing,  to  the  beneficiaries  of  a  protective  tariff ;  and  so 
on  through  the  entire  list  not  merely  of  the  luxuries,  but 
practically  of  all  the  necessaries  of  life.  And  at  the  same 
time  that  the  purchaser  is  thus  despoiled  of  his  already 
decimated  earnings,  the  supposed  protected  workingmen 
in  the  coal  mines,  iron  and  steel  industries,  etc.,  are  strik- 
ing or  threatening  to  strike  for  a  'living  wage";  that  is, 
for  a  bare  subsistence — the  wage  of  slavery.  The  wage- 
worker  of  to-day  even  as  a  labor  unionist  does  not  ask  for 
economic  freedom;  he  seeks  only  to  make  his  serfdom 
more  tolerable.  When  the  economic  equality  of  bisocial- 
ism  becomes  his  goal,  he  will  become  invincible.  Until 
then,  despite  the  efforts  of  all  those  who  simply  attempt  to 
resist  or  to  mitigate  the  evils  of  the  established  order,  tiie 


312  BISOCIALISM— POLITICAL   ECONOMY 

tragedy  of  the  submerged  element  of  society  will  go  on 
and  on — "a  striving,  and  a  striving,  and  an  ending  in 
nothing." 

The  fact  that  there  is  a  submerged  element  in  the  estab- 
lished order  is  universally  conceded.  Current  literature 
abounds  with  references  to  these  unfortunates,  and  writers 
upon  sociological  subjects  vie  with  one  another  in  discuss- 
ing the  status  of  this  element,  its  cause  and  the  possibil- 
ity of  a  remedy  for  the  evils  which  follow  in  its  train. 
The  generally  accepted  theory  is  that  these  people  are 
submerged  because  of  their  personal  weaknesses,  shiftless 
habits,  and  moral  delinquencies ;  that  there  is  no  economic 
cause  for  their  condition,  and  that  as  a  class  they  need 
not  exist  except  for  the  personal  unfitness  which  they  in- 
dividually and  collectively  exhibit;  that  whatever  wrong 
is  involved  in  their  degradation  is  their  own  personal 
wrong,  or  the  wrongs  of  their  individual  ancestors,  and 
that  society  as  a  whole  is  guiltless  of  any  offense  in  that 
respect.  This  being  the  verdict  of  its  votaries,  the  estab- 
lished order  treats  this  submerged  element  accordingly. 
It  punishes  their  individual  shortcomings  with  one  hand 
and  doles  out  individual  charities  with  the  other.  It  looks 
upon  their  shiftlessness  and  intemperance  as  the  cause 
of  their  poverty;  their  natural  inferiority  as  the  cause 
of  their  servitude;  and  their  inherent  depravity  as  the 
cause  of  their  crimes.  Consequently  it  condemns  their 
ways  of  life,  bewails  their  weaknesses,  and  punishes  their 
trespasses  against  the  law.  But  civic  consciousness  in- 
stinctively feels  that  this  is  not  enough,  and  social  con- 
science instinctively  recoils  from  such  inhospitable  views. 


OF  EQUALITY  OF  OPPORTUNITY  313 

Church  and  State  contribute  liberally  to  relieve  the  dis- 
tresses of  poverty  with  charity,  but  no  sooner  has  one 
case  been  relieved  than  there  arises  another  more  heart- 
rending than  before. 

The  diagnosis  of  bisocialisra  concerning  this  submerged 
clement  of  civilized  society  is  exactly  opposite  that  of  the 
established  order.  It  maintains  that  as  a  class  only  those 
are  economically  submerged  who  are  forced  by  present 
conditions  to  live  below  the  normal  economic  margin ;  that 
there  is  an  economic  cause  for  their  condition,  and  that 
as  a  class  they  need  not  exist  except  for  institutional 
wrongs  for  which  society  as  a  whole,  and  not  the  sub- 
merged as  individuals,  is  responsible.  It  is  true  that  if  a 
submerged  element  must  exist  because  of  the  artificial 
depression  of  the  economic  margin,  the  weak  will  naturally 
become  the  victims  of  such  artificial  conditions,  and  the 
weak,  being  depressed,  will  tend  to  become  shiftless,  in- 
temperate and  even  vicious  in  their  habits  and  behavior. 
But  tliese  traits  are  primarily  results,  not  causes,  and 
crime  is  the  concomitant,  not  the  cause,  of  evil  economic 
and  social  conditions  among  the  lowly. 

The  remedy  of  bisocialism  for  the  poverty  and  degra- 
dation of  the  submerged  element  is  quite  as  radical  in 
its  departure  from  the  established  order  as  is  its  diagnosis. 
Social  righteousness  is  what  it  seeks;  justice,  not  charity, 
is  its  remedy.  It  recognizes  a  clear  line  of  demarcation 
between  the  voluntary  and  the  involuntary  poor.  Before 
it  condemns  the  individual  it  demands  for  him  a  fair  trial 
— an  opportunity  second  to  none  in  the  land  to  succeed 
and  to  live  uprightly.     If  with  equal  opportunities  some 


314  BISOCIALISM— POLITICAL    ECONOMY 

fail,  justice  will  condemn  the  delinquent,  or  charity  will 
relieve  their  unavoidable  necessities,  as  the  case  may  re- 
quire. But  in  thei  established  order  Justice  is  helpless 
and  charity  is  abortive  because,  in  any  given  case,  it  is 
usually  impossible  to  determine  just  how  much,  if  any, 
the  individual  is  to  blame,  and  just  to  what  extent,  if 
any,  he  is  entitled  to  receive  a  helping  hand.  The  con- 
demnation which  is  the  prerogative  of  justice,  if  mis- 
takenly imposed,  degrades  instead  of  punishing;  and  the 
gracious  gift  of  charity,  wrongly  disposed,  degrades  in- 
stead of  helping.  Under  the  regime  of  bisocialism,  justice 
and  charity  may  walk  hand  in  hand,  each  exercising  its 
legitimate  function,  in  normal  conditions,  to  the  common 
benefit  and  uplifting  of  all  men.  With  equal  opportunities 
to  all — accident  and  affliction  aside — no  man  need  feel 
the  pangs  of  poverty  unless  he  chooses  to  be  poor.  With 
equal  opportunities  to  all — accident  and  affliction  aside 
— no  man  need  starve  unless  he  deserves  to  starve.  These 
are  the  doctrines  and  the  dreams  of  bisocialism.  With 
a  world  in  which  these  economic  conditions  were  realized 
we  might  reasonably  be  content.  But  until  we  have  such  a 
world,  and  such  a  world  is  possible,  we  should  be  content 
— never. 

In  order  to  determine  which  is  right  in  its  theory  of 
the  submerged  element,  it  is  only  necessary  to  test  the 
remedies  proposed  by  the  established  order  and  by  bisocial- 
ism, respectively.  If  all  the  individuals  of  this  element 
should  become  energetic,  thrifty  and  thoroughly  temperate, 
the  economic  result  would  be  an  increased  demand  for 
land-forms  upon  which  to  exert  their  labor-power;  and 


OF   EQUALITY   OF   OPPORTUNITY  Mo 

the  improvement  of  their  homes,  their  surroundings  and 
social  life  would  make  it  more  desirable  to  live  in  their 
midst;  hence  ground  rents  and  ground  values  would  cor- 
respondingly increase.  The  men  who  owned  the  land- 
forms  of  the  community  would  reap  substantially  the  en- 
tire financial  benefit.  The  augmented  price  of  land-forms 
for  home  building  would  render  it  harder  for  the  next 
generation  to  acquire  homes  in  that  locality,  and  the  net 
result  would  be  a  reduction  of  the  margin  to  a  still  lower 
level  with  a  submerged  class  developing  thereon.  The 
established  order  proposes  no  remedy  which  will  raise  the 
economic  margin.  Its  attitude  confirms  the  suggestion 
of  Tolstoi  that  the  beneficiaries  of  privilege  will  consent 
to  anything  in  the  world  for  the  relief  of  the  poor  except 
to  get  off  their  backs. 

The  abolition  of  all  monopolies  as  contemplated  by  bi- 
soeialism  would  not  of  itself  finally  solve  the  problem 
of  the  submerged  element,  for  this,  like  every  other  im- 
provement either  in  the  people  or  in  the  administration 
of  their  affairs,  would  ultimately  be  reflected  in  increased 
ground  values.  Ground  value  is  the  fundamental  differ- 
ential based  upon  legal  privilege,  and  tends  constantly  to 
absorb  all  the  benefits  of  civilization.  It  is  only  when 
the  full  program  of  bisocialism  is  applied  that  equality 
of  opportunity  may  be  established  by  the  socialization  of 
all  public  utilities  and  of  all  ground  values. 

It  is  urged  by  omnisocialists  as  a  fundamental  tenet  of 
their  economic  doctrine  that  it  is  the  owner  of  capital 
as  employer  and  as  usurer  who  submerges  and  keeps  sub- 
merged the  members  of  the  lower  strata  of  society,  and 


316  BISOCIALISM— POLITICAL   ECONOMY 

that  no  remedy  is  sufficient  which  does  not  provide  for 
the  total  extinction  of  the  capitalist  both  as  an  employer 
of  labor  and  as  a  lender  of  money-forms.  Attention  is 
called  to  the  fact  that  among  the  poorer  classes  the  highest 
rates  of  interest  are  always  paid;  that  when  the  current 
rate  of  interest  is  5  per  cent  per  annum  the  very  poor 
habitually  pay  5  per  cent  per  month,  and  upwards,  for 
loans  upon  their  scant  supplies  of  jewelry,  furniture  and 
even  clothing.  It  is  also  shown  that  these  people  in  buying 
coal  by  the  basket  and  even  by  the  scuttleful  are  charged 
double  the  price  paid  by  those  who  secure  a  season's  fuel 
at  the  most  advantageous  time.  These  are  given  merely 
as  examples  of  the  wholesale  exploitations  of  the  poor. 

The  answer  of  the  bisocialist  to  this  arraignment  of 
the  established  order  based  upon  well  known  and  indis- 
putable facts  is  the  same  as  its  answer  to  the  standard 
economist.  These  things  are  not  the  causes  of  poverty, 
but  are  its  necessary  concomitants  when  it  is  manifested 
upon  a  submerged  economic  margin.  The  men  who  loan 
these  people  money  at  exorbitant  rates  of  interest  did  not 
originally  make  them  poor;  they  simply  take  advantage 
of  a  situation  which  they  can  no  more  control  than  can 
the  exploited  borrowers  themselves.  In  order  to  live  these 
marginal  masses  must  have  an  opportunity.  Their  natural 
opportunity  having  been  removed  by  their  expropriation 
from  the  soil  upon  its  normal  margin,  they  are  driven 
to  secure  an  artificial  opportunity  at  what  cost  they  may. 
They  do  not  become  borrowers  because  of  the  high  rates 
of  interest,  but  in  spite  of  them.  The  loan  shark  and 
his  victim  are  both  the  natural  and  necessary  consequences 


OF  EQUALITY  OF  OPPORTUNITY  317 

of  a  system  of  land  tenure  and  legal  privilege  which  de- 
spoils large  numbers  of  people  of  the  normal  marginal 
return. 

The  same  thing  is  true  with  reference  to  those  who  sell 
to  the  poor  at  exorbitant  prices  the  very  necessaries  of  life. 
They  did  not  originally  make  these  people  poor.  It  was 
only  after  these  unfortunates  became  poor  that  they  had 
to  buy  in  pittances  and  to  patronize  those  who  offer  goods 
for  sale  in  that  manner  at  greatly  increased  prices. 

The  student  of  economic  questions  must  at  all  times 
clearly  realize  and  fully  consider  the  fact  that  all  condi- 
tions which  exist  below  the  natural  economic  margin  are 
abnormal,  and  hence  phenomena  there  exhibited  can  not 
be  taken  as  indicating  the  normal  results  of  economic  laws. 
In  order  that  normal  phenomena  may  be  exhibited  and 
true  conclusions  drawn  therefrom,  it  is  necessary,  first, 
to  restore  the  normal  economic  margin,  and  then  to  raise 
its  level  to  the  highest  available  point.  When  this  is  done 
(accident  and  affliction  aside)  none  but  those  who  are 
willfully  poor  need  become  the  victims  of  the  usurer. 

Let  it  be  remembered  that  bisocialism  contemplates  not 
only  the  taking  of  all  ground  values  in  taxation,  but  also 
the  expenditure  of  all  these  values  and  the  administration 
of  all  public  utilities  for  the  common  good.  The  taking 
of  all  ground  values  into  the  public  treasury  will  com- 
pletely destroy  the  holding  of  desirable  land-forms  out  of 
use,  and  will  tend  to  put  all  land-forma  to  their  best 
use.  This  will  raise  the  marginal  producer  to  the  normal 
economic  margin.  On  the  other  hand,  the  expenditure 
of  public  revenues  in  the  extension  and  cheapening  of  pub- 


'MS  BISOCIALISM— POLITICAL   ECONOMY 

lie  utilities,  such  as  railroad  transportation,  will  greatlj' 
increase  the  utility  of  those  land-forms  which  now  lie 
upon  the  normal  margin. 

Thus  by  the  public  collection  of  ground  values  the 
normal  economic  margin  will  be  restored  and  the  invol- 
untarily submerged  classes  will  be  no  more;  while  by  the 
public  expenditure  of  ground  values  the  condition  of  those 
who  produce  upon  the  normal  margin  will  be  vastly  im- 
proved. The  destruction  of  differential  privileges  with 
their  consequent  differential  values  is  necessarily  a  level- 
ing process.  But  the  leveling  contemplated  by  bisocialism 
is  largely  a  process  of  leveling  up,  not  down,  and  in  this 
respect  it  has  a  decided  advantage  not  only  over  the 
established  order,  but  also  over  omnisocialism. 


CHAPTER  X. 

OF  COMPENSATION. 

Men  having  got  themselves  into  the  dilemma  by  disobedi- 
ence to  the  law,  must  get  out  of  it  as  well  as  they  can;  and 
with  as  little  injury  to  the  landed  class  as  may  be.  Mean- 
while we  shall  do  well  to  recollect  that  there  are  others  besides 
the  landed  class  to  be  considered.  In  our  tender  regard  for 
the  vested  interests  of  the  few,  let  us  not  forget  that  the 
rights  of  the  many  are  in  abeyance;  and  must  remain  so  as 
long  as  the  earth  is  monopolized  by  individuals.  Let  us  re- 
member that  the  injustice  thus  inflicted  on  the  mass  of  man- 
kind is  an  injustice  of  the  gravest  nature. 

Herbert  Spencer* 

By  the  statement  that  bisocialism  involves  a  process  of 
leveling  up  rather  than  down,  it  is  not  meant  that  by  its 
adoption  all  may  be  brought  to  the  highest  point  of  ef- 
ficiency or  of  enjoyment.  It  is  not  claimed  that  bisocial- 
ism will  make  any  fundamental  changes  in  human  nature 
or  do  away  with  all  of  the  disutilities  of  matter,  time 
and  space.  Nor  is  it  claimed  that  no  substantial  reduc- 
tions will  be  made  in  the  net  values  now  enjoyed  by  those 
whose  interests  will  be  directly  affected  by  the  abolition  of 
all  monopolies  and  by  the  socialization  of  all  ground  values 
and  all  public  utilities.  The  effect  of  the  socialization  of 
ground  values  and  public  utilities  as  well  as  the  destruc- 
tion of  monopolies  will  necessarily  result  in  the  abolition 
of  all   differential   privileges   in   industry,  exchange   and 


Social  Statics:     Chapter  IX.     (1850.) 
319 


320  BISOCIALISM— POLITICAL   ECONOMY 

land  tenure,  with  the  consequent  elimination  of  the  net 
values  now  individually  acquired  by  means  of  these  privi- 
leges. There  is  no  question  but  that  the  people  as  a 
whole  will  profit  by  these  changes  of  economic  polity.  The 
transparent  equity  of  the  proposals  of  bisocialism,  when 
once  fully  understood,  must  appeal  to  every  serious  mind. 
If  the  transition  to  bisocialism  could  be  made  without 
disturbing  the  fortunes  of  those  who  have  prospered  un- 
der the  established  order,  there  probably  would  be  but 
slight  opposition  to  the  change.  But  this  can  not  be  done. 
With  the  abolition  of  privilege  must  come  the  cessation 
of  incomes  derived  from  these  privileges.  Socially  there 
w'ill  be  no  loss,  for  what  some  must  lose  others  must  neces- 
sarily gain.  Privilege  has  its  victims  as  well  as  its  bene- 
ficiaries. The  laws  of  Economics  are  as  immutable  as  the 
laws  of  the  physical  world,  and  if  some  enjoy  without 
working,  others  must,  to  the  same  extent,  work  without  en- 
joying. "In  the  sweat  of  thy  face  shalt  thou  eat  bread" 
is  a  condition  placed  upon  the  race  as  a  whole.  If  some 
escape  this  condition,  it  is  only  by  putting  upon  others  an 
additional  burden.  There  is  no  other  way.  In  spite  of 
the  absolute  certainty  of  this  fact,  however,  the  demand 
is  made  that  in  case  bisocialism  shall  be  adopted,  compen- 
sation shall  be  made  to  present  beneficiaries  for  the  loss 
of  their  special  privileges.  If  this  demand  were  recog- 
nized, there  would  be  a  change  in  the  form,  but  not  in 
the  substance  of  the  differential  privileges  now  enjoyed. 
If  all  such  privileges  were  bought  in  at  their  present  cap- 
italized values,  and  interest  bearing  bonds  issued  therefor, 
the  people  at  large  would  pay  as  much  tribute  as  before. 


OP  COMPENSATION  321 

It  is  true  that  future  increase  of  values  would  inure  to  the 
people  as  a  whole  and  that  the  bonds  might  ultimately  be 
paid  off.  But  before  adopting  such  a  plan  several  cir- 
cumstances are  worthy  of  consideration. 

The  claim  of  present  beneficiaries  to  compensation  is 
based  upon  the  argument  that  while  existing  conditions 
may  be  economically  wrong,  they  are  legally  right,  and 
that  the  law  having  induced  people  to  invest  in  differ- 
ential privileges,  it  should  protect  them  in  these  invest- 
ments regardless  of  the  economic  conditions  which  may 
prevail.  This  argument  assumes  that  the  laws  of  men 
have  a  higher  sanction  than  the  laws  of  nature,  and  that 
they  are  superior  to  the  laws  of  progress.  Let  us  suppose 
the  case  of  three  young  men  who  begin  life  upon  their 
own  account  at  the  same  age,  with  equal  abilities  and  un- 
der like  conditions.  One,  relying  upon  the  conditions  then 
existing  in  a  given  trade,  spends  several  years  in  acquir- 
ing a  high  degree  of  skill  and  proficiency  in  the  manu- 
facture of  a  given  article  so  that  he  now  receives  a  good 
income  from  his  efforts.  When  he  has  reached  middle  life 
and  has  made  all  his  plans  and  conformed  all  his  ways 
to  the  existing  conditions  and  in  expectation  of  their  con- 
tinuance, a  machine  is  invented  which  makes  his  skill 
practically  worthless  and  puts  him  back  into  the  class  of 
common  laborers  with  but  little  prospect  of  ever  emerging 
therefrom.  What  has  society  ever  done  to  compensate 
such  a  man?     Nothing! 

The  second  young  man  works  at  a  trade,  saves  his  earn- 
ings, purchases  an  interest  in  a  manufacturing  concern, 
becomes  sole  owner  of  the  same,  and  when  he  has  reached 


322  BISOCIALISM— POLITICAL   ECONOMY 

middle  life,  has  just  equipped  his  factory  with  expensive 
machinery  of  the  latest  type,  and  has  settled  down  to  en- 
joy a  steady  income  from  an  extensive  business.  Machines 
are  invented  and  installed  in  competing  plants  which  turn 
out  the  same  product  at  half  the  former  cost,  and  he  is 
practically  ruined,  as  it  were,  in  a  day.  What  has  society 
ever  done  to  compensate  this  man  for  being  a  victim  of 
progress  ?    Nothing ! 

The  third  young  man  likewise  works  at  a  trade,  saves 
his  earnings,  and  invests  them  in  a  vacant  lot  or  in  a  farm. 
The  progress  of  society  doubles  the  value  of  his  holding, 
and  when  he  reaches  middle  life  he  is  enabled  to  quit 
work  and  to  live  in  retirement  upon  his  ground  rents. 
A  new  and  better  form  of  taxation  is  discovered  and 
adopted  by  the  people  by  means  of  which  the  present 
worth  of  his  ground  rent — his  ground  value  as  reduced 
by  changed  conditions — is  turned  into  the  public  treasury, 
and  his  income  no  longer  supports  him  as  before.  Shall 
society  compensate  him  for  his  loss  and  not  the  other  two  ? 
Are  not  all  three  equally  the  victims  of  progress,  and  if 
60,  may  not  economic  progress  as  well  as  material  progress 
be  adopted  for  the  good  of  all  without  compensation  to 
the  individual?  And  of  the  three  men  in  question — are 
not  the  two  who  have  invested  their  skill  and  capital  in 
productive  enterprises  and  are  still  in  the  harness,  more 
deserving  of  compensation  than  the  one  who  has  ceased  to 
work  and  is  living  from  the  sweat  of  other  men's  faces? 

There  is  another  fact  to  be  considered  with  reference 
to  the  question  of  compensating  the  beneficiaries  of  the 
established  order.     In  speaking  upon  this  topic  it  is  cus- 


OF  COMPENSATION  323 

tomary  to  speak  of  compensating  present  owners,  but  the 
proper  term  is  present  beneficiaries;  when  this  distinction 
is  properly  recognized  the  question  really  answers  itself; 
for  the  beneficiary  of  a  wrong  can  have  no  claim  to  com- 
pensation for  the  loss  of  his  differential  privilege.  In  so 
far  as  the  owner  of  a  land-form  is  without  a  differential 
privilege  under  the  law,  he  would  lose  nothing  by  the 
proposed  change  in  land  tenure.  As  simple  land  user  he 
would  be  as  well  off  as  before.  If  his  land-form  should 
become  only  about  one-twentieth  as  valuable  as  before  in 
the  land  market,  it  would  produce  just  as  good  crops 
or  would  serve  him  just  as  well  for  a  home.  And  if  he 
should  sell  this  land-form  at  a  price  greatly  reduced,  he 
could  buy  another  at  a  price  correspondingly  low.  It  is 
true  that  his  taxes  upon  his  land-form  would  be  increased; 
but  he  would  be  free  from  all  other  forms  of  taxation  di- 
rect and  indirect,  and  better  than  all,  he  and  all  his  fel- 
lows would  become  economically  as  well  as  politically  free. 
As  long  as  he  remained  the  actual  user  of  this  or  any 
other  equivalent  land-form,  the  loss  of  its  present  capital- 
ized value  would  not  be  felt. 

Let  us  now  consider  the  case  of  a  man  who  by  his  own 
efforts  secured  twenty  years  ago  a  farm  of  160  acres  at 
a  cost  of  $50  per  acre.  Since  that  time  his  farm  has 
doubled  in  value,  and  he  now  receives  a  cash  rental  there- 
from of  $5  per  acre.  Upon  this  annual  income  he  can 
live  as  a  retired  farmer,  or  he  can  sell  for  $16,000  the 
farm  which  cost  him  but  $8,000  and  has  yielded  him  a 
good  return  for  twenty  years.  Instances  of  this  kind  have 
occurred  frequently  in  the  United   States,  and  are  com- 


324  BISOCIALISM— POLITICAL   ECONOMY 

monly  referred  to  as  beneficent  outcomes  of  our  system 
of  land  tenure.  But  let  us  investigate  the  matter  further. 
Let  us  assume  that  the  man  in  question  has  four  children 
who  have  grown  to  manhood  and  womanhood  during  the 
period  when  he  was  acquiring  the  original  price  and  en- 
joying the  benefits  of  this  farm.  Each  of  these  children 
is  now  in  as  great  need  of  a  farm  as  was  their  father 
twenty  years  ago.  But  what  prospect  have  they,  in  the 
farming  business,  each  to  acquire  160  acres  at  $100  an 
acre  with  the  price  of  land-forms  still  advancing?  Do 
not  the  same  forces  which  have  made  the  father  compara- 
tively rich  tend  to  keep  all  his  children  poor? 

Suppose  now  that  this  father  dies  and  leaves  his  farm 
to  his  four  children  as  their  only  inheritance.  In  com- 
mon speech  we  say  that  he  has  done  well  by  them,  and  so 
he  has.  But  under  modern  farming  processes  these  chil- 
dren can  not  divide  their  farm  into  40-acre  tracts  and 
severally  live  thereon;  nor  can  any  one  of  them  buy  the 
shares  of  all  the  others  in  ordinary  circumstances.  So 
they  sell  the  farm  at  $100  an  acre  and  divide  the  pro- 
ceeds. If,  now,  one  of  them  desires  to  own  a  farm  of 
160  acres,  he  can  pay  for  but  40  acres  at  current  prices. 
The  remaining  120  acres  will  cost  him  $12,000,  or  50 
per  cent  more  than  his  father  paid  for  the  original  farm. 
The  same  cause  which  added  $8,000  to  the  value  of  the 
father's  farm  has  added  a  like  amount  to  the  value  of 
the  farm  which  the  son  now  desires  to  buy.  To  the  values 
of  the  farms  desired  by  the  other  children  the  same  in- 
crease applies,  so  that  as  land  users  they  have  secured  an 
additional  inheritance  of  $8,000   and  an   increased  cost 


OF  COMPENSATION  325 

on  four  farms  now  desired  by  them  of  $33,000  in  tlie 
twenty  years  in  question.  As  a  family  they  would  have 
been  much  better  off  under  a  system  of  bisocialism  in 
which  all  could  have  secured  farms  at  their  actual  values 
for  use  without  eiil-er  the  payment  or  the  receipt  by  any 
person  of  that  form  of  tribute  involved  in  the  private 
appropriation  of  ground  rent.  As  a  family  of  land  users 
they  would  have  been  benefited  if,  at  any  time  within  the 
twenty  years,  bisocialism  had  been  adopted  without  com- 
pensation to  the  father  as  a  beneficiary  of  the  established 
order. 

If  compensation  is  to  be  made  to  the  beneficiaries  of 
the  established  order  when  its  inequalities  are  abolished 
through  the  adoption  of  bisocialism,  what  shall  we  say  of 
its  victims?  Are  they  not  to  be  considered?  It  is  true 
that  when  all  ground  values  are  paid  into  the  public 
treasury  and  are  expended  for  the  good  of  all,  the  multi- 
tude now"  submerged  and  despoiled  will  be  raised  to  the 
normal  economic  margin  and  thus  benefited  beyond  meas- 
ure. But  to  this  they  are  now  entitled ;  to  this  they  have 
been  entitled  these  thousand  years.  Instead  of  recompens- 
ing the  beneficiaries  of  this  institutional  wrong,  should  not 
the  State  in  administering  substantial  Justice  between  man 
and  man  take  from  the  former  beneficiaries  even  that 
they  have  and  give  it  to  the  former  victims  of  this  wrong? 
Eestitution  and  not  compensation  would  seem  to  be  the 
logical  demand  of  justice  under  the  new  dispensation. 
But  in  the  enjoyment  and  good  will  engendered  by  bet- 
ter things  the  past  will  doubtless  be  forgiven,  and  the 


3'2(;  BISOCIALISM— POLITICAL   ECONOMY 

disinherited  will  be  satisfied  when  happily  they  come  into 
their  own. 

A  favorite  problem  propounded  by  those  who  argue  in 
favor  of  compensation  to  present  beneficiaries  is  this: 
Suppose  that  a  poor  widow  owns  a  lot  next  door  to  the 
mansion  of  a  multimillionaire.  This  lot  with  its  humble 
improvements  constitutes  her  homestead;  is  all  that  she 
has  in  the  world.  The  lot  of  the  millionaire  is  no  larger 
nor  better  than  hers,  but  upon  it  he  has  built  a  residence 
at  a  cost  of  $1,000,000.  Along  comes  the  assessor  under 
bisocialism  and  assesses  the  property  of  each  at  the  same 
amount,  exempting  the  buildings  and  other  improvements 
in  both  eases,  and  listing  a  tax  against  each  lot  equal  to 
its  ground  value.    Is  this  right? 

Let  us  analyze  this  problem.  In  the  first  place,  a  widow 
who,  in  present  conditions,  owns  such  a  lot  next  door  to 
a  million-dollar  residence  is  not  poor,  though  she  may 
live  in  a  hovel.  She  could  easily  dispose  of  her  lot  at  a 
price  which  would  make  her  comparatively  rich,  and  with 
the  proceeds  she  could  live  comfortably  in  some  other 
place.  She  deserves  no  sympathy  on  the  ground  of 
poverty. 

It  must  be  conceded  that  from  an  economic  point  of 
view  she  is  not  putting  this  lot  to  its  best  use.  She  does 
not  need  such  a  lot  for  the  kind  of  house  in  which  she 
chooses  to  live.  Bisocialism  would  compel  her  to  put 
this  lot  to  a  better  use  or  surrender  it  to  some  one  who 
would.  As  it  is,  she  is  simply  standing  in  the  way  of  the 
progress  of  the  commimity,  and  the  community  rewards 
her  for  doinor  so.     Under  bisocialism  she  would  seek  the 


OF  COMPENSATION  327 

location  most  suited  to  her  means  and  mode  of  life.  No 
one  could  demand  of  her  a  farthing  more  for  a  building 
site  than  it  is  actually  worth  for  present  use,  nor  could 
she  demand  an  artificial  price  for  the  land-form  which 
she  now  owns. 

But  this  is  not  all.  In  dealing  with  institutions  all 
the  facts  involved  can  not  be  applied  to  an  exceptional 
case.  For  one  widow  who  may  own  a  home  next  door  to 
the  residence  of  a  millionaire,  there  are  a  thousand,  in 
the  established  order,  who  own  no  homes  at  all.  Suppose 
that  through  the  sudden  advent  of  bisocialism,  if  that 
were  possible,  nineteen-twentieths  of  the  value  of  this  wid- 
ow's home  was  lost  to  her.  Then  by  the  same  process  the 
difficulty  of  securing  a  home  would  be  only  one-twentieth 
as  great  to  the  thousand  other  widows.  The  condition  of 
these,  also,  should  be  considered.  They  are  below,  not 
above,  the  normal  margin.  The  first  duty  of  society  is 
to  succor  them  and  to  put  all  persons,  rich  and  poor,  upon 
a  plane  of  equality  of  opportunity.  Then,  and  not  till 
then,  individual  cases  may  be  investigated  with  the  cer- 
tainty that  things  are  what  they  seem.  At  present  per- 
sonal merits  and  demerits  are  so  hopelessly  intermingled 
with  institutional  rights  and  wrongs  that  justice  is  baffled 
at  every  turn. 

The  illustration  which  seeks  to  discredit  the  proposals 
of  bisocialism  by  an  appeal  to  the  case  of  the  poor  widow 
is  the  logical  successor  of  the  illustration  of  the  widow 
whose  all  was  represented  by  the  ownership  of  a  single 
slave  before  the  Civil  War.  In  fact,  there  is  not  an  argu- 
ment against  the  restoration  of  the  common  rights  of    the 


328  BISOCIALISM— POLITICAL   ECONOMY 

people  in  the  ground  values  and  public  utilities  of  their 
common  inheritance  that  was  not  worn  threadbare  in  de- 
fense of  human  slavery.  In  the  days  of  slavery  it  was  pro- 
posed that  if  that  institution  was  to  be  abolished  at  all, 
it  should  be  done  only  by  compensating  the  slave-owners 
for  the  loss  of  their  investments  in  human  flesh  and  blood. 
It  is  probable  that  if  the  slave-owners  had  favored  the 
abolition  of  slavery  on  these  terms,  it  might  have  been 
accomplished  in  that  way.  But  they  relied  upon  their 
supposed  legal  rights — and  lost. 

There  is  no  economic  reason  why  the  beneficiaries  of 
the  established  order  should  be  compensated  for  the  loss 
of  their  investments  in  differential  privileges  any  more 
than  that  the  slave-owners  should  have  been  compensated. 
The  question  which  Economics  asks  is  this:  Are  ground 
values  and  public  utilities  rightfully  the  subject  of  pri- 
vate property,  or  should  they  be  socialized?  If  they 
should  be  individualized,  that  is  the  end  of  the  contro- 
versy. If  they  should  be  socialized,  this  can  be  true  only 
on  the  theory  that  all  ground  values  and  public  utilities 
belong  of  right  to  the  public,  and  should  be  expended  and 
used  solely  for  the  common  benefit.  Therefore,  in  this  lat- 
ter view,  to  devote  any  revenues  arising  from  these  sources 
to  private  uses  is  economically  indefensible.  To  take 
ground  values  from  present  beneficiaries  in  the  form  of 
taxes,  and  then  to  return  it  to  them  in  the  form  of  in- 
terest upon  the  capitalized  value  of  their  differential  priv- 
ileges, would  be  an  economic  travesty.  It  would  make  a 
mockery  of  the  fundamental  economic  reform. 

It  is  one  of  the  cardinal  doctrines  of  the  law  that  pri- 


OF  COMPENSATION  329 

vate  property  shall  not  be  taken  for  public  purposes  with- 
out due  compensation.  Hitherto  it  has  not  been  customary 
to  distinguish  between  property  and  privilege,  and  the 
beneficiaries  of  privih'ge  are  wont  to  refer  to  their  privi- 
leges as  their  property.  In  this  they  have  been  sustained 
by  standard  Political  Economy  and  by  many  interpreters 
of  the  law.  There  is  all  the  difference  in  the  world,  from 
a  legal  point  of  view,  between  taking  private  property 
itself  for  public  purposes  by  condemnation  or  proceedings 
in  eminent  domain,  and  the  taking  of  property  values  for 
public  revenues  through  the  processes  of  taxation.  The 
doctrine  of  due  compensation  always  applies  to  the  former, 
never  to  the  latter.  Even  now,  in  theory,  the  revenues 
of  the  State  are  taken  because  they  belong  of  right  to  the 
State  and  not  to  the  individual,  and  for  values  taken  in 
taxation  there  can  be  no  compensation  except  the  usual 
benefits  of  government.  A  valid  claim  for  any  private 
compensation  in  this  regard  is  economically  absurd  and 
legally  impossible. 

Even  if  the  plan  of  compensating  existing  beneficiaries 
were  tenable  in  the  theory,  it  could  never  be  realized  as 
a  fact  unless  the  beneficiaries  themselves  in  apt  time 
should  voluntarily  offer  to  surrender  to  the  State  their 
differential  privileges  at  appraised  valuations.  Some  far- 
seeing  railway  officials  now  recognize  the  handwriting  on 
the  wall,  and  would  willingly  make  such  a  proposition 
concerning  the  public  utilities  which  they  control.  But 
as  a  class  the  beneficiaries  of  privilege  will  doubtless  con- 
tinue to  stand  upon  their  supposed  power  to  acquire  a 
vested  right  in  an  economic  wrong,  and  their  opportunity 


330  BISOCIALISM— POLITICAL   ECONOMY 

to  secure  recognition  for  their  claim  for  compensation 
will  thus  be  lost  through  their  own  hostile  acts  and  at- 
titude. 

The  effect  upon  land  owners  of  the  decline  in  ground 
values  brought  about  by  bisocialism  may  be  illustrated 
by  reference  to  the  decline  in  the  price  of  gold  between 
the  close  of  the  Civil  War  and  the  resumption  of  specie 
payments  in  1879.  At  a  time  somewhat  before  the  be- 
ginning of  the  war  gold  was  at  par  in  the  stock  exchange 
at  New  York.  The  agitation  and  unrest  which  preceded 
the  breaking  out  of  hostilities  caused  gold  to  go  to  a  small 
premium  prior  to  April,  1861.  From  that  date  until  July, 
1864,  the  premium  on  gold  increased,  with  fluctuations 
more  or  less  violent,  until  a  maximum  quotation  of  285 
was  attained.  The  prospect  for  the  ultimate  success  of 
the  Union  arms  permanently  checked  the  rise  in  gold, 
and  the  price  gradually  receded  until  at  the  close  of  the 
war  the  market  quotation  was  146.  During  all  the  period 
from  the  beginning  of  the  war  to  the  resumption  of  specie 
payments,  the  leading  newspapers  gave  daily  quotations 
of  the  price  of  gold  as  regularly  as  the  prices  of  wheat 
laul  corn.  The  quotation  for  gold  gradually  declined  after 
1864,  the  decline  being  accelerated  by  the  act  of  congress 
for  the  resumption  of  specie  payments,  passed  in  1875, 
until  on  or  about  January  1,  1879,  gold  was  once  more 
at  par. 

In  the  years  covered  by  this  period,  no  one  man,  per- 
haps, saw  his  particular  gold  coins  increase  in  value  from 
100  to  285;  and  no  one  man,  perhaps,  stood  all  the  loss 
on  any  particular  gold  coins  when  the  price  receded  from 


OF  COMPENSATION  331 

285  to  100.  Taken  as  a  whole,  the  gains  of  the  ascend- 
ing series  and  the  losses  of  the  descending  series  were 
distributed  day  by  day  through  the  exchanges  of  the 
market,  among  many  persons. 

Since  the  first  settlement  of  the  United  States  the  values 
of  its  land-forms  have  gradually,  though  rapidly,  in- 
creased from  zero  to  their  present  status.  With  the  ad- 
vent of  a  widespread  and  effective  demand  for  the  social- 
ization of  all  ground  values,  the  selling  prices  of  land- 
forms  will  cease  to  rise  and  then  begin  to  decline.  In 
the  years  necessary,  under  the  most  favorable  conditions, 
for  the  complete  socialization  of  ground  values,  the  de- 
cline from  the  present  price  to  the  present  worth  of  one 
year's  ground  rent  in  each  case  will  be  distributed  among 
many  persons.  ISTo  man  who  is  not  willfully  blind  to  the 
signs  of  the  times  need  suffer  any  great  loss,  if  he  exercises 
ordinary  business  prudence.  As  has  been  shown,  only  those 
will  suffer  a  real  loss  who  wish  to  hold  land-forms  simply 
as  investors  and  not  as  real  land  users,  and  those  who 
may  wish  to  change  from  land  ownership  to  some  other 
form  of  investment.  If  these  persons  act  with  sufficient 
promptness  and  discretion,  they  can  avoid  serious  loss  by 
letting  their  land-forms  pass  early  into  the  hands  of  actual 
users. 

In  the  study  of  the  questions  involved  in  the  advent 
of  bisocialism  many — perhaps  most — persons  regard  the 
question  of  compensation  to  present  beneficiaries  as  most 
important  of  all.  To  most  persons  who  cling  to  the  estab- 
lished order  and  seek  to  justify  it  against  the  assaults  of 
bisocialism,  the  question  of  compensation  to  present  own- 


332  BISOCIALISM— POLITICAL   ECONOMY 

ers,  as  they  put  it,  furnishes  the  argument  of  last  resort. 
This  will  be  the  last  ditch  of  the  vanquished  army  of  priv- 
ilege. And  yet,  as  a  matter  of  fact,  this  question  is  among 
the  least  important;  least  important  upon  its  merits, 
least  important  because  the  beneficiaries  themselves  will 
not  accept  compensation  while  yet  they  may,  and  least 
important,  also,  because  in  the  evolution  of  economic 
forces  and  of  the  distributing  processes  of  the  market  this 
question  will  practically  solve  itself. 


CHAPTER  XI. 


OF  PUBLIC   UTILITIES. 


There  must  be  no  private  use  of  public  power  or  public 
property.  These  are  created  by  the  ccmmon  sacrifices  of  all 
and  can  be  rightfully  used  only  for  the  common  good  of  all. 

Henry  D.  Lloyd. 

We  have  defined  a  public  utility  as  an  industrial  enter- 
prise which  necessitates  the  special  use  of  public  land- 
forms,  or  the  acquisition  and  use  of  private  land-forms 
under  the  special  power  of  eminent  domain,  in  supplying 
some  product  or  service  generally  desired  by  the  people. 
Such  enterprises,  in  normal  conditions,  are  not  open  to 
full  and  free  competition  among  individuals,  but  require 
some  public  grant  of  unusual  authority  or  power  to  make 
them  effective  in  private  hands.  Such  a  grant  we  have 
called  a  public  utility  franchise,  or,  more  briefly,  a  fran- 
chise. In  the  established  order  some  public  utilities  are 
socialized,  or  practically  so,  while  others  are  not. 

The  business  of  carrying  the  mails  is  an  industrial  en- 
terprise which  is  everywhere  conceded  to  be  a  proper  public 
function.  As  now  conducted  this  enterprise  is  largely 
socialized,  but  in  the  United  States  it  contains  a  curious 
admixture  of  individualism.  The  employes  of  the  postal 
department  are  nearly  all  directly  employed  by  the  gov- 
ernment, and  in  the  larger  cities  the  postoffice  buildings 
are  publicly  owned.    With  the  exception  of  these  buildings 

333 


334  BISOCIALISM— POLITICAL   ECONOMY 

and  the  mail  bags  and  locks  nearly  all  of  the  property  used 
in  the  service  is  privately  owned;  and  in  some  cases  the 
carrying  of  the  mails,  instead  of  being  by  government  em- 
ployes, is  let  by  private  contract  to  persons  who  furnish 
their  own  equipment  and  employ  their  own  help.  Nearly 
all  the  actual  carrying  of  the  mails  is  done  by  privately 
owned  railroads  under  contracts  with  the  government.  The 
entire  business  of  the  railroads,  under  our  definition,  is  a 
public  utility  since,  in  present  conditions,  it  necessitates 
the  acquisition  and  use  of  private  property  under  the  spe- 
cial power  of  eminent  domain.  All  railroads  are  operated 
under  public  utility  franchises  granted  by  the  several 
states  and  commonly  called  charters. 

Street  railways  are  public  utilities,  but  they  differ  from 
ordinary  railroads  in  this :  They  necessitate  a  special  use 
of  public  land-forms  rather  than  the  acquisition  and  use 
of  private  land-forms  through  the  special  exercise  of  a 
public  power.  A  street  is  a  public  land-form  open  to  all 
persons  alike  in  the  use  of  ordinary  conveyances,  but  ordi- 
narily only  one  company  can  use  a  given  street  for  street 
railway  purposes.  All  street  railways  are  operated  under 
public  utility  franchises. 

Telegraph  and  telephone  lines  constitute  another  form 
of  public  utilities.  Usually  they  are  constructed  along 
and  upon  public  highways,  although  they  may  require 
the  condemnation  of  private  property  for  their  special 
use.  They  also  require  public  utility  franchises  to  make 
them  effective  in  private  hands. 

Akin  to  railways  and,  to  some  extent,  to  telegraph  and 
telephone  systems  is  the  industrial  enterprise  which  now 


OF  PUBLIC  UTILITIES  335 

seeks  to  transmit  property  and  intelligence  under  and 
along  the  public  streets  by  means  of  pneumatic  tubes.  This 
constitutes  a  public  utility,  and  requires  a  franchise  ac- 
cordingly. 

The  other  public  utilities  of  importance  consist  of  those 
industrial  enterprises  by  virtue  of  which  water  and  gas 
are  conveyed  to  consumers,  and  electricity  is  conveyed  and 
furnished  for  the  purposes  of  heat,  light  and  power.  The 
transmission  of  hot  water  and  steam  for  heating  purposes 
under  and  along  the  public  streets  also  constitutes  public 

utilities. 

We  have  already  noted  that  all  public  utilities  require 
the  special  use  of  land-forms.     We  may  also  note  that 
they  all  involve  the  element  of  transportation,  the  trans- 
mission of  intelligence  by  telegraph  or  telephone  being 
deemed  a  form  of  transportation.       In  the  case  of  rail- 
roads, street   railways,  telegraphs,  telephones  and  pneu- 
matic tubes,  the  element  of  transportation  constitutes  the 
entire  service  rendered;  while  in  the  case  of  all  other  pub- 
lic utilities  enumerated  there  is  the  element  of  transpor- 
tation plus  a  product  or  service  furnished  or  rendered  in 
or  by  the  thing  transported.    In  the  case  of  railroad  ship- 
ments the  property  transported  is  furnished  by  a  private 
owner  at  the  shipping  point,  and  is  received  by  him  or  by 
another  owner  at  the  point  of  destination.    The  only  func- 
tion of  the  railroad  company  is  that  of  carrier.    In  the  case 
of  water  works,  on  the  other  hand,  the  thing  transported 
belongs  to  the  transporter  when  it  leaves  the  central  source 
of  supply,  remains  his  property  in  transit,  and  changes 
ownership  only  as  it  is  consumed. 


336  BISOCIALISM— POLITICAL   ECONOMY 

In  the  United  States  the  most  of  these  public  utilities 
are  conducted  as  private  enterprises  under  franchises 
granted  by  public  authority.  There  is  no  uniformity  of 
plan  in  vogue  concerning  them.  In  nearly  all  cities  water 
is  furnished  by  the  municipality,  and  gas  by  private  com- 
panies. Some  cities  own  and  operate  their  own  electric 
light  plants,  but  the  most  of  those  using  electricity  for 
lighting  purposes  do  not.  Telegraph  and  telephone  sys- 
tems are  universally  in  private  hands  except  as  they  may 
be  used  exclusively  by  fire  and  police  departments.  Sub- 
stantially all  straight  transportation  facilities  are  in  pri-' 
vate  hands. 

Neither  is  there  any  uniformity  in  plan  concerning  the 
charges  made  for  these  public  utilities  when  considered  as 
a  whole.  Water,  gas,  electric  light,  hot  water,  steam  or 
electric  heat,  electric  power  and  similar  utilities  are  usu- 
ally furnished  at  a  fiat  rate  throughout  the  municipality 
for  the  same  amount  of  product  supplied  or  service  ren- 
dered. In  matters  of  straight  transportation  a  flat  rate  is 
usually  maintained  on  street  railways,  and  uniform  mile- 
age rates  for  passengers  on  steam  railroads.  Telegraph 
and  express  companies  combine  the  flat  rate  and  mileage 
plans  and  use  a  sort  of  zone  system,  making  the  zone  limit 
instead  of  the  mile  the  basis  of  the  charge.  In  a  city 
like  Chicago  a  man,  by  using  transfers,  may  ride  one  block 
or  twenty  miles  for  five  cents.  On  a  steam  railroad  he 
pays  a  fixed  rate  per  mile,  regardless  of  the  distance,  in 
ordinary  circumstances. 

Under  bisocialism,  all  these  public  utilities  will  be 
owned,   operated,  and  controlled  by  the  people  in  their 


OF  PUBLIC  UTILITIES  337 

governmental  capacity.  All  railroads  will  belong  to  the 
national  government;,  and  all  local  enterprises  to  their  re- 
spective municipalities.  It  is  probable  that  what  are  now 
known  as  interurban  electric  lines  will  be  owned  and 
operated  by  the  states  in  which  they  are  located,  except  in 
so  far  as  they  involve  interstate  traffic.  If  in  time  elec- 
tricity wholly  supersedes  steam  as  a  railway  motor  power, 
these  local  electric  lines  will  merge  into  a  part  of  the  gen- 
eral railway  system. 

It  is  necessary  to  socialize  all  these  public  utilities  in 
order  to  carry  out  the  mandate  of  the  economic  imperative. 
Experience  is  daily  teaching  us  the  necessity  for  this  step, 
and  is  constantly  preparing  the  public  mind  for  definite 
action.  In  view  of  these  facts  the  matter  of  a  definite 
and  uniform  working  plan  for  the  socialization  of  these 
public  utilities  is  worthy  of  careful  consideration.  In  for- 
mulating such  a  plan  it  will  be  wise  for  us  to  keep  con- 
stantly in  mind  those  laws  of  the  market  which  are  as 
constant  and  inexorable  as  the  law  of  gravitation,  and 
quite  as  important  within  their  spheres  as  is  the  law  of 
gravitation  in  the  physical  world. 

In  the  field  of  industry,  men  are  constantly  endeavor- 
ing to  comprehend  and  to  take  advantage  of  all  the  laws 
of  nature.  Experience  has  taught  them  that  the  physical 
world  is  governed  by  immutable  laws,  and  that  by  ascer- 
taining these  laws  and  acting  in  harmony  therewith,  man 
may  now  achieve  results  which  would  have  been  deemed 
miraculous  in  other  days.  In  the  field  of  Economics  there 
are  laws  just  as  immutable  and  just  as  important,  if  wc 
would  but  seek  them  out  and  put  not  only  ourselves,  but 


338  BISOCIALISM— POLITICAL   ECONOMY 

also  our  institutions,  into  harmony  therewith.  For  there 
is  this  difference  between  physical  and  economic  laws:  A 
single  person  may  succeed  in  putting  himself  and  his  en- 
ergies into  right  relations  with  physical  laws,  and  thus 
perfect  an  invention  capable  of  physical  demonstration 
by  him  acting  alone.  All  others  may  be  incredulous,  but 
he  may  succeed  none  the  less;  but  in  the  realm  of  Eco- 
nomies the  environment  of  man  is  institutional.  One  man 
may  realize  the  defects  of  a  given  institution  and  may 
discover  a  remedy  which  would  increase  the  happiness  of 
the  race  a  thousandfold.  But  singly  he  can  not  put  his 
remedy  into  operation.  He  must  convert  a  majority  of 
his  fellows  to  his  manner  of  thinking  before  he  can  fully 
set  in  motion  those  economic  forces  whose  results  he  has 
foreseen.  These  facts  have  tended  to  keep  the  economic 
progress  of  the  race  far  behind  its  industrial  achievements. 
In  the  matter  of  the  socialization  of  public  utilities,  an 
early  attempt  at  which  is  now  practically  assured,  a  full 
understanding  of  the  economic  laws  involved  will  make 
a  whole  step  as  easy  to  be  taken  as  a  half  step;  and  in 
the  absence  of  knowledge  the  half  step  may  be  taken  in 
the  wrong  direction  and,  failing  in  its  purpose,  may  ulti- 
mately prove  to  be  a  retrograde  movement.  In  the  con- 
sideration of  the  question  of  public  utilities,  the  economic 
proposition  of  supreme  importance  is  this :  All  the  meas- 
urable benefits  of  the  socialization  of  public  utilities  are 
and  ever  will  be  reflected  in  the  values  of  the  land-forms 
occupied  by  the  community  affected.  This  is  true,  re- 
gardless of  the  size  of  the  territory  involved.    It  is  just  as 


OF  PUBLIC  UTILITIES  339 

true  of  the  land-forms  of  a  nation  as  of  city  or  village,  if 
the  public  utility  socialized  is  national  in  its  scope. 

We  have  already  shown  that  if  a  given  city  should  fur- 
nish natural  gas  to  its  inhabitants  at  the  actual  cost  of 
maintaining  and  operating  the  requisite  plant  so  that  the 
price  of  gas  to  consumers  might  be  reduced  from  $1.25  to 
25  cents  per  thousand  feet,  the  ground  rents  and  ground 
values  in  such  city  would  rise  until  the  cost  of  living 
would  be  as  great  as  before.  In  the  same  way,  if  freight 
charges  upon  corn  were  reduced  one  cent  per  bushel  from 
a  given  community  to  the  Chicago  market,  ground  rents  in 
that  community  would  increase  50  cents  per  acre,  if  50 
bushels  per  acre  was  the  average  yield  of  corn.  The  tenant 
would  be  no  better  off  than  before.  And  if  street  car  fares 
in  any  city  were  reduced  from  five  cents  a  ride  to  three 
cents,  the  working  people  would  receive  no  permanent 
gain.  The  price  of  building  lots  and  the  ground  rents  in 
the  residence  districts  w'ould  rise  so  as  to  swallow  up  the 
entire  measurable  gain.  There  is  nothing  capable  of 
more  certain  demonstration,  either  from  economic  theory 
or  from  an  appeal  to  actual  facts,  than  that  if  all  public 
utilities  Avere  socialized  and  the  benefits  thereof  furnished 
to  the  people  at  the  actual  cost  of  maintenance  and  opera- 
tion, and  the  present  system  of  private  land  tenure  were 
preserved,  the  cost  of  living  to  the  people  as  a  whole  would 
not  be  lowered  in  the  least.  More  land  than  at  present 
could  be  held  out  of  use  for  speculative  purposes,  and  the 
economic  margin  might  be  still  further  depressed  as  a 
result  of  the  added  impetus  to  the  rise  in  land  values. 

Let  us  assume,  however,  that  contemporaneous  with  the 


340  BISOCIALISM— POLITICAL  ECONOMY 

socialization  of  all  public  utilities  and  the  beginning  of 
their  operation  at  cost,  all  ground  values  were  likewise  so- 
cialized by  being  appropriated  for  public  purposes  and 
collected  into  the  public  treasury  by  means  of  taxation. 
As  before,  all  the  measurable  benefits  of  the  socialization 
of  the  public  utilities  would  be  reflected  in  ground  values ; 
but  these  values  would  themselves  be  socialized  and  would 
be  expended  for  the  common  benefit  of  all  the  people.  This 
would  relieve  producers  from  all  other  forms  of  taxation 
and  would  put  all  land-forms  upon  the  market  at  their 
current  values  for  actual  use.  Such  a  system  could  have 
no  special  beneficiaries.  All  the  measurable  benefits  of 
science,  civilization  and  government  would  inure  to  the 
actual  users  of  the  soil,  and  not  to  persons  whose  owner- 
ship gave  them  control  of  land-forms  which  they  did  not 
use  or  occupy  and  which,  perchance,  they  had  never  seen. 
Let  us  now  assume  that  under  the  socialization  of  pub- 
lic utilities  and  their  administration  in  the  interests  of 
the  people  at  actual  cost,  as  last  above  described,  the  rail- 
roads were  conducted,  as  at  present,  at  a  given  rate  per 
mile  for  the  carrying  of  passengers,  and  a  given  rate  per 
hundred  pounds,  according  to  distance,  for  the  carrying  of 
freight.  This  plan  would  discriminate,  as  at  present, 
against  those  living  at  a  distance  from  the  centers  of 
trade.  Under  a  system  which  socialized  all  ground  rents 
there  would  be  no  economic  reason  why  a  man  living  ten 
miles  from  Chicago  should  be  able  to  reach  that  city  by 
rail  at  a  cost  of  ten  cents,  while  a  man  living  one  thou- 
sand miles  away  must  spend  ten  dollars  for  railroad  fare, 
if  the  rate  be  one  cent  per  mile.    The  benefit  to  the  man 


OF  PUBLIC  UTILITIES  341 

living  near  the  city  would  be  reflected  in  the  ground  value 
of  his  land-form,  and  at  the  end  of  the  year  this  benefit 
would  be  covered  into  the  public  treasury  in  the  form  of 
taxes.  The  same  would  be  true  of  any  advantages  he  might 
enjoy  as  to  freight  rates.  This  would  ultimately  place 
them  upon  an  equal  footing  as  individuals,  and  their  net 
values  would  depend  not  upon  the  relative  desirability  of 
their  respective  land-forms,  but  upon  their  respective  ex- 
ertions. Such  a  plan  would  give  them  substantial  equality 
of  opportunity  and  at  the  same  time  furnish  the  State  a 
natural  source  of  revenue.  But  in  itself  this  plan  would 
not  tend  to  raise  the  more  remote  producer  above  the  then 
existing  normal  margin,  nor  would  it  tend  to  raise  the 
margin  itself  after  it  had  been  once  normally  established. 

Let  us  now  assume  that  with  the  socialization  of  all 
ground  values,  public  utilities  were  also  socialized  in  such 
manner  as  to  secure  for  all  transportation  in  the  United 
States  a  flat  rate  both  for  passengers  and  for  freight 
traffic,  after  the  manner  of  street  car  fares  in  cities  where 
but  one  fare  is  charged  regardless  of  the  distance  trav- 
eled. This  would  tend  not  only  to  equalize,  but  to  elim- 
inate the  element  of  distance  in  all  the  industrial  and 
commercial  affairs  of  the  United  States.  It  would  tend 
to  put  the  land-form  upon  the  Pacific  Coast  within  com- 
paratively few  miles  of  Chicago.  It  would  be  a  species 
of  cooperative  effort  by  means  of  which  the  people  as  a 
whole  might  overcome  the  disutility  of  space  to  a  degree 
wholly  impossible  to  the  individual  man,  or  to  society  un- 
der private  ownership  of  public  utilities. 

Let  us  now  further  assume  that  instead  of  a  flat  rate 


312  BISQCIALISM— POLITICAL   ECONOMY 

made  to  cover  actual  cost  of  maintenance  and  operation, 
all  forms  of  transportation  by  means  of  public  utilities  in 
the  United  States  were  made  absolutely  free  to  the  in- 
dividual, ground  values  as  before  to  be  turned  into  the 
public  treasury.  In  such  case  the  increased  benefits  of  free 
transportation  would  be  reflected  in  ground  values,  and 
would  annually  be  absorbed  into  the  public  treasury  to  an 
extent  sufficient  to  maintain  and  operate  all  public  trans- 
portation facilities.  As  a  mere  business  proposition  it 
has  the  advantage  of  much  greater  simplicity  and  cheap- 
ness over  the  plan  for  a  flat  rate.  The  collection  of  trans- 
portation charges  of  all  kinds  as  a  part  of  the  annual  tax 
upon  ground  values  would  simplify  the  operation  of  trans- 
portation facilities  to  the  last  degi'ee,  and  economically  all 
the  purposes  of  socialization  would  be  most  fully  sub- 
served. 

Free  transportation  in  conjunction  with  the  socializa- 
tion of  all  ground  values  would  greatly  raise  the  economic 
margin. 

We  have  seen  that  the  utility  of  a  land-form  depends 
upon  two  things;  its  adaptability  for  use,  and  its  location 
with  reference  to  the  centers  of  population  and  trade.  If 
transportation  were  free,  the  disutility  of  distance  would 
be  eliminated  except  in  so  far  as  it  conjointly  involved 
the  element  of  time.  Even  if  transportation  were  free, 
the  man  who  could  reach  a  given  market  in  one  hour's 
journey  would  have  an  advantage  over  one  who  was  com- 
pelled to  journey  for  a  day.  There  would  be  a  correspond- 
ing advantage  in  the  matter  of  shipments  by  freight. 
These  advantages,  however,  would    be    reflected    in    the 


OF  PUBLIC  UTILITIES  343 

ground  value  of  the  nearer  land-form,  and  by  its  socializa- 
tion the  two  men  would  be  put  on  a  parity  with  reference; 
to  their  opportunities  regarding  the  disutility  of  time. 
But  the  parity  would  be  based  upon  the  status  of  one  more 
remote.  With  reference  to  the  disutility  of  space  they 
would  not  only  be  put  upon  a  parit}^  but  the  status  of  the 
one  nearer  the  market  would  be  made  the  basis  of  their 
equality.  The  advantages  of  the  one  more  remote  would 
be  raised  to  an  equality  with  the  other  as  to  the  element 
of  mere  distance.  If  the  more  remote  land-form  were 
upon  the  economic  margin,  the  status  of  the  marginal  pro- 
ducer would  be  raised,  barring  only  the  disutility  of  time, 
to  the  level  of  the  producer  who  has  his  market  just  at 
hand.  There  is  not  within  the  range  of  economic  thought 
so  good  an  illustration  of  the  vast  importance  of  conform- 
ing the  institutions  of  society  to  the  laws  of  the  economic 
world. 

Obedience  to  the  laws  of  the  physical  world  has  made 
man  the  master  of  his  physical  environment.  Invention 
after  invention,  process  after  process,  and  skill  upon  skill 
have  added  prodigiously  to  the  results  of  the  exertion  of 
labor-power.  But  despite  all  these,  there  remains  an  army 
of  those  who  are  compelled  to  toil  below  the  normal  mar- 
gin. To  these  victims  of  institutional  wrongs  the  victories 
of  man  over  the  physical  world  bring  no  relief.  There  is 
still  a  realm  of  degradation  and  despair  where  women 
work  harnessed  with  the  ox,  and  in  field,  factory  and 
mine  little  children  toil  their  joyless  lives  away.  And  so 
it  must  remain  until  society  shall  understand  and  obey  the 
laws  of  the  economic  world,  and  so  arrange  the  institution 


344  BISOCIALISM— POLITICAL  ECONOMY 

of  property  that  physical  laws  and  economic  laws  shall 
work  in  harmony,  so  that  both  nation  and  individual  may 
conform  to  the  laws  of  life.  When  this  is  done  the  dread- 
ful doctrine  of  Malthusianism  may  be  laughed  to  scorn, 
and  the  dread  specters  of  want  and  the  fear  of  want  will 
disappear  from  every  normal  and  industrious  life  forever. 


CHAPTER  XIL 

OF  ECONOMIC  EVOLUTION. 

Oh,  sometimes  gleams  upon  our  sight 
Through  present  wrong,  the  eternal  Right; 
And  step  by  step,  since  time  began. 
We  see  the  steady  gain  of  man. 

John  O.  Whittier. 

Bisocialism  presents  to  the  world  a  definite  and  com- 
prehensive working  plan.  In  order  to  bring  about  the 
condition  of  eqiialitj'  of  opportunity  which  it  advocates  and 
seeks  to  establish,  bisocialism  proposes  that  certain  definite 
steps  be  taken  in  the  transition  from  the  old  order  to  the 
new.  It  realizes  that  all  these  steps  can  not  be  taken  at 
one  time  nor,  probably,  can  they  be  taken  in  their  logical 
and  most  effective  order.  In  overcoming  obstacles  in  the 
economic  world  men  are  prone,  as  in  the  physical  world, 
to  advance  along  the  lines  of  least  resistance.  Local  sit- 
uations and  conditions  greatly  affect  men's  minds  and  tend 
to  bring  into  prominence  here  one  and  there  another  of 
the  phases  of  economic  reform.  For  these  reasons  it  is 
wellnigh  certain  that  the  socialization  of  public  utilities 
will  precede  the  more  important  and  fundamental  reform 
embraced  in  the  socialization  of  all  ground  values. 

The  steps  to  be  taken  in  carrying  out  the  plan  of  biso- 
cialism are  few  in  number  and  simple  in  detail.  They 
are  not  entire  departures  from  conditions  existing  under 

345 


.'U6  BISOCIALISM— POLITICAL   ECONOMY 

the  established  order,  but  are  steps  which  can  be  taken 
in  the  course  of  economic  evolution.  For  instance,  we 
already  derive  part  of  the  public  revenue  from  the  taxa- 
tion of  ground  values ;  all  that  is  necessary  to  bring  about 
the  fundamental  economic  reform  is  to  increase  the  so- 
cialization of  ground  values  by  means  of  taxation  until 
all  ground  values  are  taken  and  these  become  the  sole 
source  of  public  revenue.  We  now  have  a  standard  of 
value  which  recognizes  one  of  the  three  economic  disutil- 
ities— the  disutility  of  matter.  This  standard  may  be 
extended  until  it  recognizes  also  the  disutilities  of  time 
and  space.  We  already  have  greenbacks  as  currency.  These 
are  de  facto  credit-forms  as  long  as  they  are  receivable  at 
par  in  payment  of  taxes,  although  they  are  issued  as  debit- 
forms.  We  could  exchange  these  dollars  for  dailors,  and 
thus  have  credit-forms  in  name  as  well  as  in  fact.  We 
now  have  public  ownership,  operation  and  control  of  some 
public  utilities,  notably  water  works  in  cities.  We  can 
extend  this  principle  to  all  public  utilities.  We  now  have 
excellent  examples  of  flat  rate  charges  for  public  utility 
products  and  services  in  water  rates,  street  car  fares,  and 
rates  of  postage.  An  extension  of  this  principle  is  all 
that  is  necessary  to  work  a  partial  evolution  in  respect 
to  such  charges. 

Finally,  we  have  an  excellent  example  of  free  transpor- 
tation and  the  reflection  of  its  benefits  in  increased  rents 
in  the  case  of  passenger  elevators  in  modern  office  build- 
ings. What  is  a  system  of  elevators  in  a  twenty-story 
office  building  but  a  miniature  railway  system  stood  on 
end?     Tenants,   their  customers  and  clients  are  carried 


OF  ECONOMIC  EVOLUTION  347 

to  any  floor  free  of  charge;  but  the  expense  of  this  service 
is  counted  in  and  becomes  a  part  of  the  rent  for  every  part 
of  the  building.  To  have  a  collector  of  fares  in  each  ele- 
vator would  be  intolerable;  but  the  landlord  gets  his  in- 
come from  the  elevators  none  the  less.  So  it  might  be  if 
all  public  utilities  were  furnished  by  the  government  free 
of  charge.  All  the  benefits  of  the  service  would  be  re- 
flected in  ground  values  and  could  he  easily  and  inex- 
pensively collected  as  a  part  of  the  public  revenue.  Pat- 
ents and  copyrights  can  be  abolished  by  the  mere  repeal 
of  a  few  statutes.  If  these  steps  were  taken  one  after  an- 
other, or  cotemporaneously,  as  the  case  might  be,  a  com- 
plete system  of  bisocialism  would  be  evolved  from  the 
established  order.    We  would  then  have: 

1.  Ground  values  for  the  sole  source  of  revenue. 

2.  The  current  daily  return  to  common  labor-power 
upon  the  margin — the  dailor — for  the  standard  of  all 
values. 

3.  Government  credit-forms  for  currency. 

4.  The  public  ownership,  operation  and  control  of  all 
public  utilities. 

5.  The  extension  of  the  flat  rate  principle  to  all  pub- 
lie  utility  charges :    and,  ultimately, 

6.  Free  transportation  and  the  free  use  of  all  public 
utilities. 

7.  The  abolition  of  all  forms  of  differential  privilege. 
These  are  the  steps  in  the    evolution    of    bisocialism, 

which  includes  not  only  the  socialization  of  all  ground 
values  and  all  public  utilities,  but  the  establishment  of 
equality  of  opportunity  in  all  things.    The  plan  is  simple. 


348  BISOCIALISM— POLITICAL   ECONOMY 

is  it  not  ?  Desirable,  is  it  not  ?  Feasible,  is  it  not  ?  Let 
"US  see  what,  if  anything,  stands  in  the  way. 

There  is  nothing  in  the  laws  of  the  physical  world 
which  says  nay  to  any  of  these  propositions.  They  are 
all  in  harmony  with  the  laws  of  the  economic  world. 
Morality  can  not  set  its  seal  of  disapproval  upon  a  work- 
ing plan  which  will  bring  equality  of  opportunity  to  all 
men.  Nothing  in  the  world  hinders  the  adoption  of  this 
beneficent  plan  except  the  institutions,  laws  and  customs 
of  the  established  order.  These  constitute  not  a  physical, 
not  an  economic,  not  an  ethical,  but  merely  a  social  disutil- 
ity; a  disutility  made  by  man,  the  concentrated  result  of 
the  mistakes  of  centuries. 

We  are  prone  to  believe,  and  to  act  upon  the  assump- 
tion, that  all  the  institutions,  laws  and  customs  of  the 
established  order  have  their  basis  in  nature  and  represent 
the  highest  and  best  thought  of  the  ages  upon  economic 
subjects.  The  truth  is  just  the  opposite.  All  peoples 
have  had  higher  and  better  conceptions  concerning  the 
institution  of  property,  and  particularly  of  land  tenures, 
than  those  which  dominate  the  world  to-day.  In  Econom- 
ics, as  well  as  in  matters  political,  intellectual  and 
spiritual,  there  was  a  retrograde  movement  which  cul- 
minated in  the  fall  of  the  Roman  Empire.  In  other  di- 
rections the  lost  ground  has  been  regained  and  great  ad- 
vances have  been  made  in  many  fields  of  thought.  Eco- 
nomically, however,  the  Benaissance  has  just  begun. 
Economically,  we  are  just  emerging  from  the  Dark  Ages. 

Considering  its  time  in  the  world's  history  and  the  traits 
and  environments  of  the  people  for  which  it  was  intended, 


OF  ECONOMIC  EVOLUTION  349 

the  Jewish  code  as  formulated  by  Moses  furnished  the 
best  economic  working  plan  which  has  ever  been  realized 
in  actual  practice.  It  came  the  nearest  to  giving  to  all 
men  of  a  given  tribe  or  nation  equality  of  opportunity 
and  a  fair  return  for  effort  expended  of  any  code  which 
has  dealt  with  the  institution  of  property.  It  looked  upon 
the  land  as  the  heritage  of  the  Jews  as  a  people,  and,  to 
prevent  its  falling  into  the  hands  of  a  few,  this  code  pro- 
vided that  every  fifty  years  each  man  should  come  again 
into  his  possessions.  "The  land  shall  not  be  sold  for- 
ever" *  is  the  teaching  of  the  Mosaic  code.  "The  heaven 
is  the  Lord's ;  but  the  earth  hath  He  given  to  the  children 
of  men,"  sang  the  Psalmist.f  "Woe  unto  them  that  join 
house  to  house,  that  lay  field  to  field,  till  there  be  no 
place,"  t  warned  the  prophet  when  the  laws  of  Moses  were 
forgotten  and  the  land  owners  exploited  the  labors  of  the 
poor.  And  in  portraying  the  blessed  state  of  the  new 
Jerusalem  which  was  at  all  times  the  ideal  of  his  race,  the 
same  prophet  said  in  his  final  exhortation:  "They  shall 
build  houses,  and  inhabit  them ;  and  they  shall  plant  vine- 
yards, and  eat  the  fruit  of  them.  They  shall  not  build 
and  another  inhabit;  they  shall  not  plant  and  another 
eat."  §  And  he  among  the  Jews  of  olden  time  who  was 
said  to  be  wisest  of  all  put  into  the  mouth  of  the  preacher 
these  words:  "It  is  good  and  comely  for  a  man  to  cat 
and  to  drink  and  enjoy  the  good  of  all  his  labor     *     *     * 

*  Leviticus,   xxv:  23. 
t  Psalms,  cxv:  16. 
t  Isaiah,  v:  5. 
§  Isaiah  Ixv:  21,  22. 


350  BISOCIALISM— POLITICAL    ECONOMY 

all  the  days  of  his  life,  which  God  giveth  him;  for  it  is  his 
portion."  * 

The  people  of  the  United  States  are  largely  of  Anglo- 
Saxon,  Teutonic,  Celtic,  and  Scandinavian  descent.  Yet 
we  maintain  a  system  of  land  tenure  which  was  foreign 
to  the  conceptions  of  all  these  peoples  until  it  was  forced 
upon  them  in  the  days  of  feudalism.  Joseph  Fisher,  a 
Fellow  of  the  Eoyal  Historical  Society  of  Loudon,  Eng- 
land, in  an  essay  read  before  that  body  in  1875,  pointed 
out  the  fact  that  among  all  these  peoples  the  earth  was 
recognized  as  a  common  heritage  and  was  originally  treated 
by  them  accordingly.  The  same  conception  which  the 
Jews  expressed  in  the  Mosaic  account  of  the  creation  of 
man  out  of  the  dust  of  the  earth  the  Celts  expressed  in  a 
beautiful  figure  which  recognizes  the  earth  as  "perpetual 
man."  Mr.  Fisher  shows  from  an  extensive  historical 
review  that  our  present  system  of  land  tenure  is  not  based 
upon  the  conception  that  tlie  earth  is  our  common  mother, 
but  upon  the  harsh  dictum  of  the  Roman,  rendered  sav- 
age by  the  lust  of  conquest:  "To  the  victor  belongs  the 
spoils."  t  William  the  Conqueror,  following  the  Roman 
custom,  parceled  out  the  land  of  England  among  his 
chieftains  to  be  held  by  them  as  tenants  of  the  crown. 
Under  the  early  feudal  tenure  the  lands  were  charged  with 
wellnigh  the  entire  maintenance  of  the  State  which  was 
then  chiefly  a  military  organization.  Under  this  tenure 
each  land  owner  was  obliged  to  attend  the  king  with  a 
certain  quota  of  men  and  a  certain  amount  of  military 


*  Ecclesiastes  v:   18. 

t  History  of  Landholding  in  England. 


OF  ECONOMIC  EVOLUTION  351 

supplies  whenever  called  upon  in  time  of  war  or  local  in- 
surrection. 

In  time  some  of  these  military  vassals  became  so  pow- 
erful as  to  menace  the  throne;  the  land  owners  were  all- 
powerful  in  parliament;  and  at  the  same  time  the  com- 
mercial interests  of  the  nation  had  greatly  increased.  Con- 
sequently, it  so  happened  that  when  the  king  desired  to 
reduce  the  military  prestige  of  his  landed  lieutenants,  they 
desired  to  relieve  themselves  of  a  great  part  of  the  cost 
of  maintaining  the  crown.  The  result  was  that  both  king 
and  under-lord  worked  together  to  reduce,  and  finally  to 
abolish  the  military  charges  upon  the  land,  and  to  sub- 
stitute instead  a  money  charge  against  all  forms  of  prop- 
erty and  of  business  enterprise  for  the  maintenance  of  the 
State.  By  means  of  this  change  and  the  adoption  of  the 
system  of  indirect  taxation  the  greater  part  of  the  cost 
of  government  has  been  shifted  from  privilege  (primi- 
tively and  still  chiefly  represented  by  landholding)  to 
production ;  from  ground  rents  to  interest  and  wages. 

The  system  of  land  tenure  which  we  have  taken  by 
adoption  from  the  Eonian  Empire  caused  the  downfall 
of  that  empire  itself.  In  all  conquered  countries  the 
lands  were  parceled  out  to  military  chieftains  and  to  fa- 
vorites of  the  emperor.  In  the  original  domain  of  the 
Eomans  themselves  the  land  was  wrested  from  the  peo- 
ple and  concentrated  in  the  hands  of  the  beneficiaries  of 
foreign  conquest.  The  people  as  a  whole  then  had  little 
or  no  interest  either  in  their  government  or  in  their  na- 
tive land.  The  world  knows  the  result.  When  the  bar- 
barians came  down  from  the  Xortli  and  invaded  the  em- 


352  BISOCIALISM— POLITICAL   ECONOMY 

pire  they  found  a  people  composed  upon  the  one  hand  of 
the  enervated  beneficiaries  of  privilege,  and  upon  the  other 
of  a  mass  of  listless  and  artless  slaves.  All  fell  an  easy 
prey  to  tlie  brute  force  of  the  invading  hosts.  In  the 
language  of  Pliny:    "Great  estates  ruined  Italy." 

Bisocialism  does  not  appeal  to  lawlessness.  It  proposes 
to  carry  out  its  working  plan  in  conformity  with  the  doc- 
trine that  order  is  the  first  law  of  earth  as  well  as  of 
heaven.  But  this  does  not  imply  that  the  established  or- 
der is  sacred.  Bisocialism  teaches  that  the  established  or- 
der from  an  economic  point  of  view^  is  neither  sacred  nor 
tenable;  indeed,  that  it  is  no  longer  tolerable.  But  all 
the  changes  which  it  proposes  are  to  be  made  in  an  orderly 
manner.  They  can  all  be  made  under  the  present  forms 
of  law.  Not  a  new  principle  of  administration  need  be 
adopted;  not  a  new  function  of  the  State  need  be  added. 
Bisocialism  is  radical,  but  not  revolutionary.  It  advocates 
nothing  but  simple  economic  evolution.  It  does  not  pro- 
pose to  abolish  the  State  or  to  violate  the  law;  but  it 
does  propose  to  better  the  State  and  to  change  the  law 
without  hesitation  wherever  it  does  not  conform  to  the 
economic  needs  of  the  people.  It  believes  with  Emerson 
that 

"In  dealing  with  the  State,  we  ought  to  remember  that  its 
institutions  are  not  aboriginal,  though  they  existed  before  we 
were  born;  that  they  are  not  superior  to  the  citizen;  that 
every  one  of  them  was  once  the  act  of  a  single  man;  every 
law  and  usage  was  a  man's  expedient  to  meet  a  particular 
case;  that  they  are  all  imitable,  all  alterable;  we  may  make 
as  good;    we  may  make  better."* 


*  Politics :    Essays,  second  series. 


OF  ECONOMIC  EVOLUTION  353 

It  is  claimed  by  the  advocates  of  omnisocialism  that  it, 
also,  is  an  evolutionary  doctrine;  in  fact,  that  it  is  the 
logical  evolutionary  outcome  of  the  present  tendencies  in 
the  established  order.  Consequently,  omnisocialism  does 
not  view  the  concentration  of  industrial  and  commercial 
enterprises  in  the  hands  of  what  are  commonly  called 
"trusts"  with  disapproval,  but  with  approval.  Its  plan 
is  based  upon  the  contention  that  this  process  of  monopo- 
listic concentration  will  go  on  and  on  until  all  such  en- 
terprises are  absorbed  by  one  giant  monopoly;  and  that 
then  the  people  in  their  collective  capacity  will  absorb  this 
trust  monopoly  and  thereafter  conduct  its  affairs  for  the 
good  of  all  the  people.  The  government  will  supersede  all 
other  monopolies;  but  it  is  claimed  that  in  the  benefits 
of  its  monopolistic  features  all  will  share. 

In  other  words,  omnisocialism  proposes  to  encourage  the 
evolution  of  the  worst  feature  of  the  established  order  and, 
finally,  to  base  itself  upon  this  feature  wlien  the  latter  be- 
comes so  bad  as  to  be  unbearable.  Bisocialism,  on  the 
other  hand,  proposes  at  once  to  abolish  the  evils  of  the 
established  order,  and  out  of  its  remaining  features  to 
evolve  a  system  which  has  nothing  but  that  which  is  eco- 
nomically right  for  its  basis  as  well  as  for  its  purpose  and 
its  final  goal. 

The  standard  economists  also  claim  the  benefits  of  the 
doctrine  of  evolution  in  defense  of  the  established  order. 
But  as  Political  Economy  under  their  elucidation  has  been 
called  the  "dismal  science,"  so  the  view  of  evolution  which 
they  adopt  is  of  that  dismal  and  despairing  variety  which 
is  stronfflv  tinctured  with  ilalthusianism. 


354  BISOCIALISM— POLITICAL   ECONOYY 

According  to  Malthus  the  human  race  tends  to  increase 
at  a  geometrical  ratio,  while  the  means  of  subsistence  can 
be  made  to  increase  only  at  an  arithmetical  ratio.  Be- 
tween these  two  ratios  there  is  the  same  difference  as  be- 
tween the  results  of  a  multiplication,  which  doubles  a  num- 
ber and  then  repeatedly  doubles  the  product,  and  an  addi- 
tion, which  simply  adds  the  same  number  time  after  time. 
For  instance,  the  number  1,  if  used  in  geometrical  pro- 
gression, gives  as  a  result  the  series  1,  2,  -i,  8,  16,  32,  64, 
128,  256,  etc.;  while  the  same  number,  if  used  in  arith- 
metical progression,  gives  as  a  result  the  series  1,  2,  3,  4, 
5,  6,  7,  8,  9,  etc.  Assuming  that  in  a  new  country  popu- 
lation tends  to  double  itself  every  twenty-five  years,  Mal- 
thus argued  that  at  the  end  of  two  centuries  the  ratio  of 
population  to  subsistence  would  be  as  256  to  9,  and  in  three 
centuries  as  4,096  to  13.  Consequently,  according  to  this 
doctrine,  the  evils  of  the  economic  world  are  now  and 
over  have  been  caused  by  overpopulation.  The  only  pos- 
sible remedy,  in  this  view,  is  one  which  will  check  the 
growth  of  population,  especially  among  the  poor,  where 
propagation  has  always  been  greatest.  Malthus,  who  was 
a  clergyman,  taught  that  Providence  has  provided  certain 
natural  checks  upon  population,  such  as  a  result  from  the 
loss  of  life  through  famines,  pestilences,  and  wars.  And 
that  aside  from  these  there  remains  only  the  prudential 
check  by  virtue  of  which  men  and  women,  especially  among 
the  poor,  may  voluntarily  and  persistently  refrain  from 
propagating  their  kind.* 


*  For  a  masterly  and  complete  refutation  of  Malthusianism 
in  its  economic  aspect,  see  Henry  George's  Progress  and 
Poverty,  Book  II. 


OF  ECONOMIC  EVOLUTION  355 

Since  the  days  of  Malthus,  who  published  his  work  on 
population  in  1798,  the  decimation  of  population  by  fam- 
ines, pestilences,  and  wars  has  largely  ceased,  and  the 
remedy  by  means  of  the  prudential  check  does  not  appear 
to  have  been  extensively  adopted,  at  least  by  the  poor. 
Current  writers,  therefore,  have  merged  the  doctrine  of 
Malthus  into  that  phase  of  the  doctrine  of  evolution  which 
puts  great  stress  upon  the  theory  of  the  survival  of  the 
fittest.  It  is  now  maintained  that  the  reduction  of  great 
classes  of  people  to  that  state  of  poverty  which  disqualifies 
and  exterminates  its  victims  is  but  the  working  out  of 
a  natural  law  by  means  of  which  the  weak  are  crowded 
to  the  wall  in  order  that  only  the  fittest  may  survive  and 
perpetuate  the  race. 

This  modern  doctrine,  like  its  predecessor,  does  not  ex- 
actly serve  its  purpose  when  applied  to  economic  phenom- 
ena. In  too  many  cases  this  alleged  providential  working 
out  of  natural  laws  does  not  destroy  the  unfit,  but  simply 
disqualifies  them  from  self-maintenance  and  throws  them 
into  poorhouses,  jails,  and  asylums,  there  to  become  a 
burden  upon  those  who  have  shown  themselves  to  be  fit 
to  survive.  This  has  led  to  a  discussion  among  the  pres- 
ent day  defenders  of  the  established  order,  looking  toward 
the  reduction  of  the  number  of  those  whom  society  may 
adjudge  to  be  unfit,  by  means  of  such  restraints,  not  only 
upon  marriages,  but  upon  their  personal  liberties  as  will 
prevent  their  bringing  fellow-beings  into  a  world  already 
apparently  overcrowded. 

But  even  this  presumptuous,  arbitrary,  and  tjTannical 
action  by  the  State  is  not  deemed  sufficient  by  the  more 


356  BISOCIALISM— POLITICAL  ECONOMY 

pronounced  advocates  of  the  elimination  from  society  of 
those  who  are  deemed  to  be  unfit  to  survive  and  to  per- 
petuate the  race.  The  president  of  one  of  the  leading  uni- 
versities of  the  United  States  has  given  his  approval  to 
the  plan  of  exterminating  those  who  are  deemed  most  un- 
fit by  refusing  to  them  even  the  hand  of  charity,  and  thus 
allowing  them  to  die.    He  says : 

"One  thing  is  certain,  in  the  words  of  Dr.  Amos  G.  Warner, 
that  the  'function  of  charity  is  to  restore  to  usefulness  those 
who  are  temporarily  unfit,  and  to  allow  those  unfit  from 
heredity  to  become  extinct  with  as  little  pain  as  possible.' 
Sooner  or  later  the  last  duty  will  not  be  less  important  than 
the  first."* 

In  this  statement  there  is  a  suggestion  not  only  that 
the  State  should  allow  these  unfortunates  to  die  for  want 
of  charitable  assistance,  but  that  it  should  affirmatively 
assist  in  their  removal  in  some  manner  "as  painless  as 
possible."  To  this  extremity  will  the  special  pleaders  of 
privilege  yet  be  driven  in  order  to  avoid  recognition  of 
the  fact  that  a  majority  of  these  delinquents  are  simply 
victims  of  institutional  wrongs  which  depress  the  margin 
and,  consequently,  oppress  the  poor.  It  is  not  that  these 
people  are  so  weak  from  heredity  or  any  other  cause  that 
they  can  not  cope  successfully  with  their  natural  environ- 
ment. It  is  because  their  normal  environment  has  been 
destroyed,  and  because  from  birth  they  are  surrounded 
by  conditions  which  no  man,  in  normal  conditions,  needs 


*  "Sources  of  Political  Degradation":  David  Starr  Jordan, 
LL.  D.,  President  of  Leland  Stanford  University,  in  North- 
western  Christian  Advocate,  June  24,  1894. 


OF  ECONOMIC  EVOLUTION  357 

to  meet,  that  they  are  reduced  to  such  dire  extremities. 
The  remedy  is  not  to  kill  them  in  cold  blood,  nor  to  let 
them  die  as  painlessly  as  may  be,  nor  yet  to  leave  them 
to  the  hand  of  charity.  It  is  to  raise  them  to  their  normal 
level  and  then  gradually  to  raise  that  level  until  no  human 
being  will  dare  to  determine,  much  less  to  declare,  that 
any  man  created  in  the  image  of  his  Maker  is  unfit  to 
survive. 

It  may  seem  to  some,  and  especially  to  those  who  have 
been  most  thoroughly  indoctrinated  with  the  idea  that  for 
present  economic  evils  there  is  no  remedy,  that  even  the 
full  program  of  bisocialism  with  its  consequent  raising 
of  the  economic  margin  can  not  render  unnecessary  the 
terrible  struggle  for  mere  subsistence — a  living  wage — in 
which  the  masses  of  the  people  are  now  involved.  Let 
such  persons  consider  this  proposition:  Suppose  that  in 
a  given  community  there  are  available  nine  jobs,  on  the 
average,  for  every  ten  men,  with  no  chance  of  self-em- 
ployment. In  this  condition  one  man  must  always  be 
idle,  and  a  continuous  struggle  among  these  laborers  for 
employment  necessarily  follows.  They  at  once  bid  down 
to  a  mere  living  wage,  and  even  then  the  struggle  will 
not  cease.  The  one  unemployed  man  continues  to  be  a 
disturbing  factor,  and  the  whole  ten  men  live  constantly 
in  want  or  the  fear  of  want.  They  are  slaves  working  and 
living  in  the  guise  of  free  men. 

Suppose  now  that  by  the  introduction  of  bisocialism 
conditions  in  that  community  are  changed  only  to  the 
extent  of  making  ten  available  jobs  for  every  nine  men 
and  of  furnishing  ample  self-employment  upon  a  normal 


358  BISOCIALISM— POLITICAL   ECONOMY 

margin.  The  laborers  of  that  community  at  once  pass 
from  economic  sLavery  to  economic  freedom.  Wages  rise 
from  mere  subsistence  to  what  can  be  made  by  self-employ- 
ment upon  the  margin.  Instead  of  one  man  constantly 
seeking  a  job  to  the  abasement  of  himself  and  the  terror 
of  his  fellows,  a  job  is  always  seeking  an  extra  man.  The 
man  at  the  margin,  not  the  employer,  becomes  master  of 
the  wage  situation.  If  the  tenth  job  finds  a  man,  it  must 
take  him  from  the  margin;  it  must  induce  him  to  give 
up  profitable  self -employment.  The  employer,  however, 
can  not  be  exploited  by  his  laborers.  He  must  so  conduct 
his  business  that  he  can  afford  to  pay  the  normal  marginal 
wage,  but  that  is  all ;  and  of  this  he  would  have  no  reason 
to  complain.  The  prosperity  of  the  wage  earners  would 
furnish  a  brisk  market  for  his  products  and  he,  as  well 
as  they,  would  be  relieved  of  the  terrible  strain  and  un- 
certainty which  attends  production  in  the  established  or- 
der. The  average  employer  would  be  infinitely  better 
off  under  bisocialism  than  under  the  present  system. 

Again,  it  may  seem  to  some  inequitable  to  take  from 
the  owner  of  a  farm  approximately  one-half  of  the  value 
of  its  produce  in  taxation,  and  take  nothing  from  the  in- 
come of  a  man  who  has  a  like  sum  invested  in,  for  in- 
stance, the  banking  business.  But  it  must  be  remembered 
that,  once  established,  bisocialism  would  regulate  values 
in  such  manner  as  to  equalize  all  incomes  resulting  from 
equal  investments  and  equal  expenditures  of  the  same 
grade  of  labor-power.  Suppose  that,  under  bisocialism, 
two  men  of  equal  ability,  energy,  and  thrift,  and  with 
equal  capital,  should  engage,  the  one  in  farming,  and  the 


OP  ECONOMIC  EVOLUTION  359 

other  in  banking.  The  farmer  invests  $20,000  in  land- 
forms.  He  knows  in  advance  that  the  State  will  take  each 
year  the  present  worth  of  the  rental  value  of  his  farm  in 
taxes,  and  he  pays  a  price  based  upon  snch  a  system  of 
taxation.  If  the  current  rate  of  interest  is  5  per  cent 
per  annum,  he  buys  at  a  price  which  will  net  him  5  per 
cent  after  the  payment  of  the  tax.  Other  things  being 
equal,  he  could  purchase  about  twenty  times  as  much 
land  with  $20,000  as  at  present.  In  these  circumstances 
the  taking  of  the  tax  would  not  harm  him  a  particle. 

On  the  other  hand,  the  banker  invests  $20,000  in  his 
business.  He  pays  no  tax  at  all  upon  this  investment,  but 
his  income  from  it  will  not  exceed  5  per  cent  in  ordinary 
circumstances.  Tf  it  did,  other  men  would  withdraw 
money  from  other  forms  of  investment  and  go  into  the 
banking  business.  It  is  a  mistake  to  assume  that  under 
bisocialism  there  will  be  any  discrimination  in  favor  of 
investments  in  bank  stocks,  bonds,  etc.,  simply  because 
these,  in  common  with  all  other  things  except  land-forms, 
will  be  exempt  from  taxation. 

Still  other  persons  may  object  to  bisocialism  because  it 
does  not  condemn  the  taking  of  interest,  and  eliminate 
this  feature  from  our  economic  life.  But  ]:)liysi(al  science 
might  as  well  condemn  the  tides  of  the  sea  and  undertake 
to  eliminate  them  from  the  phenomena  of  nature.  Eco- 
nomic interest  arises  out  of  the  fact  that  labor-forms  may 
be  so  circumstanced  as  to  overcome  or  mitigate  the  di.«util- 
ity  of  time,  and  as  long  as  time  lasts  economic  interest 
will  accrue.     And  as  long  as  economic  interest  accrues  it 


300  BISOCIALISM— POLITICAL    ECONOMY 

must  be  distributed  in  the  processes  of  the  market,  and 
commercial  interest  will  be  received  and  paid. 

Xor  is  there  the  slightest  reason  for  looking  upon  the 
payment  of  interest,  in  normal  conditions,  as  an  economic 
evil.  On  the  contrary,  it  fulfills  a  beneficent  function.  In 
tlie  natural  order,  a  generation  of  young  men  come  into 
the  industrial  field  as  a  generation  of  older  men  seek  to 
leave  it.  The  latter  may  have  accumulated  labor-forms,  or 
their  economic  equivalent  in  money,  for  much  of  which 
they  have  no  present  need.  The  younger  men  are  so  cir- 
cumstanced that  they  can  use  these  accumulations  to  ad- 
vantage in  overcoming  the  disutilities  of  time.  By  the 
payment  of  interest  these  two  classes  are  brought  to- 
gether and,  in  normal  conditions,  both  are  benefited.  Tak- 
ing the  community  as  a  whole,  there  is  a  prevention  of 
great  economic  waste,  inasmuch  as  labor-forms,  unused, 
rapidly  deteriorate,  and  money-forms  stored  away  deprive 
the  people  of  their  requisite  medium  of  exchange. 

Under  bisoeialism  the  rate  of  interest  will  probably  be 
greatly  reduced  because  of  the  removal  of  artificial  disutil- 
ities which  now  compel  many'  men  to  borrows  In  normal 
conditions  all  borrowing  will  be  purely  voluntary,  and  the 
desire?  of  the  marginal  borrower  will  control  the  rate  of 
interest.  But  under  bisoeialism,  also,  a  given  income  will 
give  greater  satisfaction  of  desire  because  of  the  lower- 
ing of  prices  wdiich  will  follow  the  abolition  of  all  artificial 
disutilities.  The  current  rate  of  interest  may  be  reduced 
one-half,  but  if  the  cost  of  living  is  also  reduced  one-half, 
the  lender  will  be  relatively  as  well  off  as  before. 

Under  bisoeialism  there  will  not  arise  and  persist  a 


OF  ECONOMIC  EVOLUTION  361 

class  of  lenders  not  (at  some  time)  laboring.  Nor  will 
there  arise  and  persist  a  class  of  borrowers  habitually  ex- 
ploited becanso  of  their  necessities.  The  evils  of  the  pres- 
ent system  of  usury  will  disappear,  1)ut  interest  as  an  eco- 
nomic phenomenon  will  persist.  The  number  of  voluntary 
interest-payers  will  probably  increase.  If  so,  this  will  in- 
dicate an  increase  of  economic  opportunity  and  prosperity^ 
in  the  community  so  affected. 

The  evolutionary  program  of  bisocialism  does  not  pur- 
port to  be  able  to  eliminate  from  human  life  all  the 
struggle  for  subsistence.  It  recognizes  that  this  struggle 
has  its  beneficent  side,  and  that  without  it  and  the  neces- 
sity for  it,  all  progress  would  end.  But  it  distinguishes 
between  that  struggle  which  is  necessitated  by  nature  for 
overcoming  the  disutilities  of  matter,  time  and  space,  and 
that  fiercer  struggle  which  is  necessary  only  because  of 
those  institutions,  laws  and  customs  which  conflict  with 
the  laws  of  nature  and  create  false  economic  and  social 
disutilities. 

Two  men  may  go  out  together  and  unite  their  energies 
in  overcoming  some  natural  disutility  for  the  satisfaction 
of  their  common  desires;  or  they  may  expend  an  equal 
amount  of  energy  in  contending  between  themselves  for 
the  possession  of  some  superior  natural  opportunity  for 
satisfying  their  desires.  The  former  struggle  is  economic; 
it  uplifts,  it  ennobles.  The  second  is  barbaric ;  it  degrades, 
it  disqualifies.  The  former  is  the  struggle  justified  and 
contemplated  by  bisocialism;  the  latter  is  the  struggle  ex- 
emplified and  encouraged  by  the  established  order.  The 
one  involves  an  evolution  by  which  man  overcomes  the 


362  BISOCIALISM— POLITICAL   ECONOMY 

disutilities  of  the  natural  world  by  means  which  arc  in 
harmony  with  his  own  highest  physical,  intellectual,  social 
and  moral  development ;  the  other  involves  an  evolution 
that  exempts  the  successful  from  further  physical  struggle, 
while  increasing  the  physical  tasks  of  the  unsuccessful; 
which  gives  to  society  as  a  whole  a  one-sided  intellectual 
development,  and  which  puts  the  institution  of  property 
and  the  entire  field  of  industry  and  exchange  upon  a  low 
moral  plane.  When  the  evolutionary  working  plan  of  bi- 
socialism  is  adopted,  the  struggle  of  man  with  man  for 
mere  opportunity  will  cease,  those  disutilities  which  are 
purely  social  will  disappear,  and  all  men  will  work  to- 
gether in  overcoming  the  disutilities  of  matter,  time  and 
space. 


CHAPTER  XIII. 

OF   THE   INDIVIDUALIZATION   OF   VALUES. 

To  own  the  source  of  labor  products  is  to  own  the  labor  of 
others;  to  own  what  you  produce  from  that  source  is  to  own 
only  your  own  labor.  Nature  furnishes  gold  mines,  but  men 
fashion  gold  rings;  the  right  of  ownership  is  radically  differ- 
ent. Louis  F.  Post. 

The  most  fundamental  step  in  the  program  of  bisocial- 
isra  is  the  socialization  in  taxation  of  all  ground  values. 
As  has  been  shown  in  former  chapters,  this  step  will  make 
it  possible  to  adopt  the  economic  standard  of  value,  and 
to  maintain  a  system  of  currency  issued  in  payment  for 
labor,  services  and  labor-forms  furnished  to  the  State, 
and  redeemable  in  payment  of  taxes.  It  will  solve  the 
money  question.  It  will  also  eliminate  from  our  economic 
life  the  basic  form  of  monopoly — the  monopoly  of  natural 
opportunities.  It  has  also  been  shown  that  the  socializa- 
tion of  all  ground  values  will  furnish  the  only  true  basis 
for  the  solution  of  the  question  of  the  ownership,  opera- 
tion and  control  of  public  utilities;  that  it  will  solve  the 
great  question  of  transportation,  and,  above  all,  that  it 
is  the  only  economic  policy  that  will  raise  the  economic 
margin  to  its  normal  position  and  make  it  possible  for  all 
men,  with  equal  opportunities,  to  satisfy  their  desires  with 
the  least  exertion.  In  raising  the  economic  margin  this 
policy  will  give  to  the  marginal  laborer  the  full  fruits  of 
his  labor-power  and  thus  solve  the  wages  question. 

363 


364  BISOCIALISM— POLITICAL   ECONOMY 

But  however  important  may  be  the  socialization  of  all 
ground  values  and  all  public  utilities,  when  this  has  been 
accomplished  it  will  be  no  less  important  that  all  labor 
values  and  capital  values  shall  be  individualized  to  the 
highest  degree. 

So  important  is  this  phase  of  the  program  of  bisocial- 
ism  that,  at  the  present  time,  nearly  all  persons  who  fa- 
vor the  appropriation  of  ground  values  for  revenue  and 
the  municipalization  of  all  public  utilities  class  themselves 
as  individualists  rather  than  socialists.  But  any  move- 
ment which  seeks  to  overcome  the  evils  of  the  established 
order  must  emphasize  in  every  possible  way  the  affirma- 
tive steps  in  its  program.  A  negative  doctrine  does  not 
move  people  to  action.  Xeither  does  laying  the  greatest 
stress  upon  the  negative  phases  of  a  reform  movement  in- 
duce people  to  enlist  under  its  banner.  The  two  most 
fundamental,  the  all-inclusive  steps  in  the  forward  move- 
ment in  the  realm  of  Economics,  are  distinctively  social- 
istic. It  is  the  socialization  of  ground  values  and  of  pub- 
lic utilities  that  gives  character  to  the  entire  movement 
as  a  governmental  policy,  and  that  aptly  gives  to  the 
movement  as  a  whole  the  distinctive  name  of  Bisocialism. 

It  must  at  all  times  be  recognized,  however,  that  the 
final  purpose  of  these  socialistic  steps,  as  of  the  whole 
movement,  is  to  secure  economic  freedom  for  the  individ- 
ual. Any  form  or  phase  of  socialism  which  does  not  tend 
directly  and  j^ersistently  toward  the  immediate  freedom  of 
the  individual  has  no  place  in  the  program  of  bisocialism. 
True  socialism  and  true  individualism  are  not  in  any  wise 


OF  THE  INDIVIDUALIZATION  OF  VALUES         365 

antagonistic  or  incompatible.  They  are  the  two  halves  of 
a  consistent  whole. 

The  doctrine  that  every  man  is  entitled  to  all  the  values 
distinctively  created,  directly  or  indirectly,  by  his  labor- 
power  necessarily  follows,  if  all  men  are  entitled  to  per- 
sonal freedom.  To  say  that  a  man  is  free  is  to  say  that  he 
is  sole  owner  of  himself.  But  if  any  man  owns  himself, 
he  is  entitled  as  of  right  to  his  own  labor-power,  and  to 
have  exclusive  control  of  its  exertion.  If  this  is  true,  then 
it  also  follows  that  he  owns  and  is  entitled  to  control  all 
the  distinctive  results  of  his  own  labor-power.  He  can 
not  own  and  control  his  labor-power,  if  another  man,  with- 
out his  consent,  can  own  or  control  the  distinctive  results 
of  his  labor;  and  he  can  not  own  himself,  if  another 
man,  without  his  consent,  can  own  or  control  his  labor- 
power;  nor  can  he  own  himself,  if  another  man,  either 
by  force  or  by  law,  can  own  or  arbitrarily  control  the  land- 
forms  upon  which  his  labor-power  must  be  exerted,  or 
upon  which  he  must  stand  in  order  to  exert  his  labor- 
power  at  all. 

Property  in  labor-forms  (including  capital-forms)  has 
its  economic  basis  in  the  ownership  by  man  of  himself — 
in  the  inalienable  economic  freedom  of  the  individual. 
If  any  other  man  or  any  number  of  men  under  the  guise 
of  government,  or  under  the  sanction  of  the  law,  can  de- 
spoil him  of  any  of  his  labor  values  or  capital  values,  then 
to  that  extent  is  any  man,  so  despoiled,  a  slave.  In  what- 
ever form  economic  slavery  may  appear,  its  essence  is 
simply  unrequited  toil. 

The  taxation  of  labor  values  and  capital  values  is  usu- 


366  BISOOIALISM— POLITICAL   ECONOMY 

ally  defended  upon  the  ground  that  the  State  protects  man 
in  the  acquisition,  use  and  enjoyment  of  labor-forms.  But 
in  a  former  chapter  it  was  sho^vn  that  in  the  case  of  a 
labor-form  there  is  no  increment  of  its  value  to  which 
the  State  may  point  and  lay  claim  as  having  created  it 
or  caused  it  to  accrue.  It  has  also  been  shown  that  all  the 
value  of  any  labor-form  directly  accrues  from  the  exer- 
tion of  some  particular  person  or  persons  who  give  to 
such  labor-form  its  distinctive  utility.  So  far  as  any  fa- 
vorable action  or  protection  of  the  State  is  concerned,  the 
value  of  the  labor-form  is  lessened  by  the  extension  and 
improvement  of  the  market.  On  the  other  hand,  all  the 
measurable  benefits  derived  from  the  protection  of  the 
State  are  directly  and  fully  reflected  in  ground  values.  In 
this  view  it  appears  that  the  entire  value  of  a  labor-form 
should  be  left  to  the  person  or  persons  whose  labor  has 
given  to  it  that  distinctive  utility  which  results  in  value; 
and  that  the  State  should  resort  to  ground  values  for  its 
sole  source  of  revenue. 

It  may  be  said,  also,  in  opposition  to  the  taking  of  labor 
values  and  capital  values  in  taxation  that  the  citizen  owes 
the  State  no  more  than  the  State  owes  the  citizen.  From 
a  civic  point  of  view  a  good  citizen  is  of  as  much  benefit 
to  society  as  society  is  to  him.  From  an  economic  point 
of  view  the  same  thing  is  true  of  a  producer  either  in  in- 
dustry or  in  exchange.  Every  man  who  enters  the  market 
either  as  buyer  or  seller  tends  to  make  the  market  more 
general,  and  to  increase  those  gains  to  society  as  a  whole 
which  result  from  the  socialization  of  utility.  Thus  we 
see  that  both  the  benefits  of  the  State  to  man  as  an  in- 


OF  THE  INDIVIDUALIZATION  OF  VALUES        oGl 

dividual  and  of  man  as  an  individual  to  the  State  are  im- 
measurable. There  is  no  more  reason  why  the  State  should 
attempt  to  collect  compensation  for  an  immeasurable  util- 
ity conferred  by  it  upon  a  citizen,  than  that  he  should 
demand  a  bonus  from  the  State  for  the  immeasurable  util- 
ity which  he  confers  upon  it  by  his  participation  in  in- 
dustry and  exchange. 

Economic  Science  is  the  science  of  measurable  utilities, 
and  its  decrees  limit  the  State  in  the  latter's  attempt  to 
put  a  price  upon  the  benefits  which  it  confers,  to  the  only 
values  which  reflect  such  benefits  in  measurable  form,  viz., 
ground  values.  The  attempt  of  the  State  to  measure  in 
an  arbitrary  manner  its  immeasurable  benefits,  and  to 
reap  where  it  has  not  sown  by  taxing  labor  values  and  cap- 
ital values,  is  so  contrary  to  the  laws  and  principles  of  Eco- 
nomic Science  that  it  has  always  resulted  in  failure  and 
always  must  so  result.  No  State  has  ever  yet  succeeded 
in  taxing  labor  values  and  capital  values  with  any  de- 
gree of  fairness,  fullness,  or  success  in  any  way.  Such 
attempts  have  always  been  disappointing  to  the  State  and 
disastrous  to  large  numbers  of  its  citizens.  Xo  one  who 
has  ever  honestly  given  this  matter  even  a  casual  investi- 
gation has  failed  to  realize  that  the  taxation  of  personal 
property,  so-called,  is  utterly  unfair  and  ineffectual ;  and 
no  one  who  has  even  a  passing  knowledge  of  the  true  canon 
of  taxation  has  failed  to  realize  that  to  attempt  such  taxa- 
tion is  an  egregious  economic  blunder. 

One  of  the  most  comprehensive,  thorough  and  trust- 
worthy exposures  of  the  inequalities  and  iniquities  of  tax- 
ation under  the  present  system  may  be  found  in  the  Eighth 


368  BISOCIALISM— POLITICAL   ECONOMY 

Biennial  Report  of  the  Bureau  of  Labor  Statistics  of 
Illinois  (1894).  This  official  report  discusses  not  only 
facts,  but  also  principles  concerning  the  question  of  taxa- 
tion, and  closes  with  a  recommendation  that,  as  soon  as 
practicable,  site,  or  ground  values  be  substituted  in  taxa- 
tion for  state  purposes,  the  value  of  public  utility  fran- 
chises being  treated  as  a  form  of  site  value. 

Among  many  other  things,  this  report  shows  that  for 
the  year  189-4  Cook  county,  containing  the  City  of 
Chicago,  reported  for  taxation  but  397  fire  and  burglar- 
proof  safes,  while  Kane  county,  containing  no  large  city, 
and  but  one-eighteenth  as  many  people,  reported  483  such 
safes  for  taxation.  The  average  values,  by  counties,  of 
fire  and  burglar-proof  safes  as  reported  in  sixteen  counties 
for  that  year  ranged  from  $19.54  to  $93.30,  Cook  county 
being  next  to  the  lowest  in  its  valuations.  In  Cook  county 
a  watch  or  clock  was  reported  for  every  157  persons;  while 
in  Macon  county  a  watch  or  clock  was  reported  for  every 
12  persons,  the  average  values  also  being  higher  in  the  lat- 
ter county  than  in  the  former.  The  pianos  listed  in  the 
state  ranged  in  average  value  from  $28.39  in  Cook  county 
to  $84.61  in  Hardin,  a  county  without  a  railroad,  in  the 
extreme  southern  part  of  the  State.  For  the  same  year  the 
value  of  all  the  diamonds  listed  for  taxation  in  Cook 
county,  with  its  population  of  1,250,000,  was  but  little 
more  than  $17,000,  the  law  then  requiring  all  property  to 
be  listed  at  its  fair  cash  value.  And  yet  it  is  sometimes 
argued  that  the  present  system  must  be  maintained  in 
order  to  prevent  persons  who  wear  diamonds  from  escaping 
taxation ! 


OF  THE  INDIVIDUALIZATION  OF  VALUES        369 

Between  the  years  1872  and  1897  the  laws  of  Illinois 
required  all  personal  property  to  be  listed  for  taxation  at 
its  fair  cash  value,  and  all  real  estate  (not  specially  ex- 
empt) at  its  fair  cash  value^,  estimated  at  the  price  it  would 
bring  at  a  fair,  voluntary  sale.  From  1873  to  1893  the 
population  of  the  State  increased  over  50  per  cent.  Yet  the 
personal  property  of  Illinois  as  listed  for  taxation  in  1873 
amounted  to  $287,292,809,  as  against  $145,318,406  in 
1893,  a  decrease  in  twenty  years  of  $141,974,403.  The 
valuation  in  1873  was  $113.11  per  capita,  against  only 
$37.98  in  1893. 

It  may  be  said  in  reply  to  this  that  by  common  acqui- 
escence the  assessors  of  the  State  gradually  changed  from 
valuations  based  upon  full  fair  cash  values  in  1873  to  about 
one-third  of  such  values  in  1893  as  the  basis  of  their  as- 
sessments. In  a  general  way  this  is  true,  although  such 
action  was  contrary  to  law,  the  statute  during  all  that 
time  remaining  unchanged.  But  a  further  examination  of 
the  facts  shows  that  upon  this  hypothesis  the  matter  of  un- 
dervaluation is  in  no  wise  improved,  inasmuch  as  the  re- 
ductions in  value  were  far  from  uniform  throughout  the 
state.  In  Hardin  and  Calhoun  counties  (both  without 
railroads  but  with  people  of  a  high  grade  of  honesty — for 
which  they  were  duly  punished  with  high  taxes)  there  was 
an  actual  increase  of  valuations  of  3.56  per  cent  in  the 
former  and  13.06  per  cent  in  the  latter.  In  all  other 
counties  there  was  a  decrease  in  valuations  ranging 
from  8.18  per  cent  in  Massac,  to  70.84  per  cent  in  Mason 
county,  making  an  extreme  variation  in  valuations  of 
nearly  84  per  cent  among  all  the  various  counties  of  the 


370  BISOCIALISM— POLITICAL   ECONOMY 

State.  As  a  rule  the  rate  of  decrease  of  valuation  was 
greatest  where  the  increase  of  actual  value  was  greatest 
and  vice  versa;  and  as  a  rule  the  strictly  agricultural 
counties  paid  more  taxes  according  to  population  and  to 
the  actual  value  of  their  property  than  the  counties  re- 
porting other  kinds  of  property. 

In  the  same  term  of  years  the  process  of  changing 
(contrary  to  law)  from  the  actual  fair  cash  value  to  some 
fractional  part  of  it  as  a  basis  of  taxation  was  applied 
to  real  estate,  and  every  county  in  the  State  showed  a  de- 
creased valuation  for  the  twenty  years,  ranging  from  a 
decrease  of  1.33  per  cent  in  Winnebago  to  60  per  cent  in 
Clay  county.  Under  a  system  in  which  the  entire  ground 
value  of  every  piece  of  real  estate  was  taken  in  taxation 
every  year  no  inequalities  in  the  assessment  of  real  estate 
would  be  possible.  All  buildings  and  other  improvements 
would  then  be  exempt  from  taxation  instead  of,  as  now, 
being  assessed  with  all  the  inequalities  of  personal 
property. 

It  is  objected  by  many  that  the  abolition  of  personal 
property  taxation  Avould  permit  bankers  and  others  who 
have  investments  in  stocks,  bonds,  and  mortgages  entirely 
to  escape  taxation.  They  practically  escape  taxation  now. 
In  1894  all  the  bankers  and  brokers  in  the  county  of  Cook 
(including  Chicago),  other  than  national  banks,  listed  for 
taxation  under  the  head  of  "moneys  of  banks  (other  than 
national),  bankers,  brokers,  and  stock  Jobbers"  the  small 
sum  of  $43,925.  This  included  money  on  hand  and  in 
transit,  together  with  the  amount  of  funds  in  the  hands 


OF  THE  INDIVIDUALIZATION  OP  VALUES        371 

of  other  banks,  bankers,  brokers  or  others,  subject  to 
check,  and  other  cash  items  not  included  in  the  above. 

Less  than  one  year  before  the  date  for  the  assessment 
of  1894,  in  order  to  allay  the  fears  of  the  public  concern- 
ing the  financial  condition  of  the  country  on  account  of 
the  panic  then  developing,  the  state  auditor  of  Illinois 
published  a  statement  of  the  condition  of  27  leading  banks 
of  Chicago  (other  than  national)  as  shown  by  their  sworn 
reports  made  pursuant  to  law.  From  this  statement  it 
appears  that  these  27  banks  alone  had  on  hand  on  June 
5,  1893,  cash  to  the  amount  of  $7,877,637.97;  due  from 
other  banks,  $9,347,333.13;  and  checks  and  other  cash 
items,  $1,766,800.67,  or  a  total  of  taxable  moneys  under 
these  heads  of  $19,001,771.67.  The  amount  listed  by  all 
banks  in  Cook  county,  other  than  national,  eleven  months 
later  was  only  $43,925.  What,  in  the  meantime,  became 
of  the  difference,  $18,947,846.67?  And  yet  we  pretend  to 
tax  bankers  and  brokers  to  the  same  extent  and  in  the 
same  way  as  other  people. 

We  also  pretend  to  tax  the  credits  owned  by  the  rich, 
but  the  illusion  is  just  as  great  as  in  the  case  of  the  tax- 
ing of  moneys.  For  the  year  1894  all  bankers,  brokers, 
etc.,  in  Cook  county  listed  for  taxation  credits  to  tlic 
amount  of  $10,000  as  reported  by  the  state  board  of  equali- 
zation. On  June  5,  1893,  the  27  banks  of  the  City  of 
Chicago  above  referred  to  reported  to  the  state  auditor  the 
possession  of  taxable  credits,  after  making  all  lawful  de- 
ductions, of  $1,058,105.25.  Between  that  date  and  May 
1,  1894,  these  taxable  credits  had  shrunk  to  $10,000,  the 
shrinkage  in  eleven  months  being  $1,048,105.25. 


372  BISOCIAUSM— POLITICAL  ECONOMY 

As  in  the  case  of  other  forms  of  personal  property,  the 
evasion  of  taxation  of  moneys  and  credits  is  not  uniform 
throughout  the  State.  The  evasions  are  greatest  where 
there  are  the  most  moneys  and  credits  subject  to  taxation 
under  the  law.  At  the  time  when  the  bankers,  brokers, 
etc.,  of  Cook  County  (including  Chicago)  reported  for 
taxation  only  $43,925,  the  same  classes  in  Peoria  county 
reported  $279,684.  In  Cook  county  the  amount  per  cap- 
ita was  less  than  four  cents;  in  Peoria  county  it  was 
nearly  four  dollars.  In  the  case  of  credits  the  classes  in 
question  in  Cook  county  reported  $10,000,  while  in  Win- 
nebago county  the  amount  was  $253,514.  The  amount  per 
capita  in  Cook  was  less  than  one  cent;  in  Winnebago, 
more  than  six  dollars  and  a  quarter. 

The  conditions  described  in  great  detail  in  the  official 
report,  from  which  we  have  quoted  facts  and  figures  con- 
cerning only  a  few  of  the  most  flagrant  abuses,  are  not 
confined  to  the  assessments  of  1893  and  1894,  nor  to  the 
State  of  Illinois.  In  every  State  in  the  Union  similar 
conditions  now  prevail.  The  tax  evasions  are  greater  in 
Chicago  than  in  Peoria  because  the  opportunities  are 
greater,  and  because  the  pressure  of  artificial  competi- 
tion for  the  use  of  land-forms  drives  men  to  such  expedi- 
ents as  evading  taxes  at  the  risk  of  the  penitentiary  in 
order  to  excel,  and  often  in  order  to  survive.  In  New  York 
the  evasions  are  greater  and  the  inequalities  more  glaring 
than  in  Chicago;  but  local  conditions  considered,  the  in- 
equalities of  personal  property  taxation  everywhere  are 
about  as  bad  as  they  can  be.  The  rich  everywhere  con- 
ceal their  property  and  evade  their  taxes  to  a  vastly  greater 


OF  THE  INDIVIDUALIZATION  OF  VALUES         373 

extent  than  the  poor.  The  poor  have  so  little  that  it  can 
not  well  be  hidden;  it  must  be  openly  used  all  the  while. 
In  a  similar  way,  the  property  of  a  farmer  is  open  to 
the  inspection  of  every  one  and  its  extent  and  value  arc 
known  to  all  around  him;  but  in  the  city  it  is  usually 
impossible  to  ascertain  what  any  man  is  worth  in  personal 
property,  if  he  chooses  not  to  have  it  known.  But  in  either 
city  or  country,  the  more  a  man  is  worth  the  easier  it  is 
for  him  to  conceal  a  relatively  large  part  of  his  personal 
property  and  effects  from  the  assessor.  In  neither  city 
nor  country,  however,  can  he  conceal  his  land-forms. 

The  primary  fault  is  not  in  the  people  who  evade  their 
taxes;  it  is  in  the  system  of  taxation. 

"This  system  is  in  its  nature  so  easily  evaded  by  actively 
conniving  with  assessors  or  passively  accepting  their  fraudu- 
lent favors  that  it  offers  premiums  for  fraud  and  perjury, 
which  must  be  paid  by  the  honest  and  truthful.  Such  a  sys- 
tem tends  to  suppress  all  honesty  and  good  faith  in  connection 
with  taxation;  it  demoralizes  the  whole  community.  Even 
the  respectable  rich  seem  to  be  no  more  proof  against  lawless- 
ness when  the  law  pinches  them  at  the  pocket,  than  the  poor 
when  it  pinches  them  at  the  stomach. 

"And  why  should  personal  property  be  taxed?  Is  the 
supply  of  personal  property  a  thing  to  be  kept  in  check,  like 
the  liquor  traffic  in  some  places  by  high  license,  or  dogs  in 
others  by  a  high  dog  tax?  Or  is  it  something  that  the  com- 
munity needs?  something  that  the  more  of  it  there  is  in  the 
community,  the  better  off  the  people  of  that  community  may 
be?  Is  it  a  friend  to  be  invited  in,  or  an  enemy  to  be  driven 
out?  No  man  would  experience  any  difficulty  in  answering 
for  himself.  He  wants  personal  property.  The  more  he  gets, 
the  better  he  is  satisfied.  Neither  he  nor  his  family  regard  it 
as  a  nuisance  to  be  suppressed.  Yet  every  personal  property 
tax  increases  his   difficulty  in  getting  and   keeping  personal 


374  BISOCIALISM— POLITICAL   ECONOMY 

property.  Every  such  tax  assists  in  driving  that  kind  of  prop- 
erty out  of  his  household  and  keeping  it  out.  Every  such  tax 
tends  to  lower  the  quality  of  the  personal  property  he  can 
alTord  to  own.  And  every  such  tax,  by  thus  diminishing 
demand  for  personal  property,  tends  to  diminish  opportunities 
for  employment  in  making  and  selling  it. 

"This  species  of  taxation  should  be  abolished."* 

Leaving  now  the  question  of  the  taxation  of  personal 
propert}'^ — labor  values  and  capital  values — let  us  examine, 
briefly,  certain  property  values,  complex  in  their  nature, 
with  reference  to  the  question  of  their  individualization  or 
socialization.  These  are  the  values  of  mining  properties,  oil 
fields  and  similar  land-forms.  Although  held  under  ordi- 
nary land  tenure,  these  properties  partake  of  the  nature  of 
monopolies  since  the  territories  which  they  collectively  oc- 
cupy are  limited  in  extent;  yet  they  are  not  monopolies 
under  the  definition  we  have  formulated,  since  their 
finallness  territorially  is  not  a  limitation  placed  upon 
them  by  law  but  by  nature.  Neither  are  they  public  util- 
ities, since  they  require  neither  the  private  use  of  pub- 
lic property  nor  the  special  exercise  of  any  public  power 
to  make  them  effective  in  private  hands;  no  franchise  is 
necessary  for  their  use  or  operation.  Subject  only  to 
the  limitation  of  supply,  the  values  of  these  land-forms 
do  not  differ  from  those  of  land-forms  put  to  ordinary 
uses,  and  the  application  of  the  full  program  of  bisocial- 
ism  will  completely  socialize  them  through  the  socialization 
of  their  ground  values,  without  making  it  essential  for 
the  State  to  enter  upon  their  ownership,  operation  and 
control,  as  is  necessary  in  the  case  of  public  utilities. 

*  Report  Illinois  Bureau  Labor  Statistics,  1894,  pp.  353,  354. 


OF  THE  INDIVIDUALIZATION  OF  VALUES         375 

Let  those  to  whom  it  may  seem  that  the  full  program 
of  bisocialism  will  not  be  sufficient  to  eradicate  all  the 
evils  which  now  attend  the  mining,  the  oil  and  similar 
industries  consider  the  following: 

If  all  the  coal  lands  in  the  United  States  were  open 
to  use  and  operation,  in  normal  conditions,  there  would 
be  no  scarcity  of  coal  at  reasonable  prices.  As  it  is,  the 
coal  fields  have  been  bought  up  by  great  corporations,  and 
more  good  mining  opportunities  are  held  out  of  use  than 
are  used.  The  corporations  owning  these  coal  lands  are 
closely  affiliated  with  railroad  companies,  so  that  the  own- 
ers of  the  mines  control  the  transportation  of  coal  and 
can  secure  discriminations  in  freight  rates  favorable  to 
themselves  and  highly  unfavorable  to  "independent"  com- 
peting mine  owners  and  to  the  public.  Monopoly  of  the 
natural  opportunities  for  mining  coal  and  of  transporta- 
tion facilities  forms  the  basis  of  all  that  is  evil  in  the  coal 
situation  to-day.  The  same  thing  is  true  of  the  situation 
in  all  other  mining  industries  and  in  the  oil  fields.* 

The  full  program  of  bisocialism  will  permanently  cor- 
rect both  of  these  evils.  If  the  entire  selling  value  of  all 
natural  opportunities  were  taken  annually  by  the  State 
in  taxation,  the  price  of  mining  lands  and  oil  fields  would 
fall  to  the  present  worth  of  one  year's  ground  rent  in  each 
case.  This  would  bring  the  price  of  raining  properties 
within  the  reach  of  many  more  investors,  but  no  man 
could  afford,  even  for  one  year,  to  hold  any  valuable  min- 
ing opportunity  out  of  use.     In  every  year  he  would  lose 

*  For  a  full  demonstration  of  this  fact  see  Henry  D.  Lloyd's 
Wealth  against  Commonwealth. 


376  BISOCIALISM— POLITICAL   ECONOMY 

the  entire  income  from  the  value  of  the  mine  unless  he 
put  it  to  use,  and  this  loss  could  never  be  recouped,  as 
now,  in  increased  future  selling  value.  The  tax  would 
increase  each  year  along  with  the  value  and  ahsorb  it  sub- 
stantially  all. 

Again,  under  bisocialism,  all  transportation  facilities 
would  be  owned,  operated  and  controlled  by  the  State, 
and  all  freight  charges  would  either  be  uniform  at  a  flat 
rate  regardless  of  distance  or  entirely  free.  This  would 
practically  eliminate  all  differences  of  location  in  miniug 
properties  and  put  all  mining  enterprises  upon  an  equal 
footing  as  to  all  markets  in  the  United  States.  In  sucli 
circumstances,  and  in  the  absence  of  any  discriminating 
duties,  it  is  impossible  for  mining  enterprises  of  any  char- 
acter to  be  monopolized,  or  for  the  prices  of  coal  or  other 
minerals,  or  of  mineral  oils,  to  be  maintained  above  the 
prices  arising  in  a  normal  market. 

The  trust  monopolies  which  exist  to-day,  and  whicli 
have  already  reached  their  culmination  for  this  decade, 
are  doomed  to  almost  immediate  dissolution  unless  based 
upon  one  of  the  five  primary  sources  of  monopoly,  viz. : 
Patents;  tariffs;  transportation  rebates  and  discrimina- 
tions; the  private  ownership,  operation  and  control  of 
public  utilities,  including  railroads;  and  the  private  ov,-n- 
ership,  under  present  tenures,  of  natural  resources  anvl 
opportunities. 

Trust  monopolies  based  wholly  upon  patents  are  rela- 
tively transient,  being  limited  by  the  life  of  the  patent 
or  patents  involved.  Those  based  upon  tariffs  are  more 
or  less  insecure  because  of  tariff  revisions,  and  of  the  fact 


OF  THE  INDIVIDUALIZATION  OF  VALUES        377 

that  so  many  may  compete  for  the  differential  privileges 
involved  as  to  reduce  the  advantages  to  a  nominal  basis. 
In  order  permanently  and  surely  to  profit  by  tariff  dis- 
criminations^ the  trust  monopoly  must  become  compound 
and  include  differential  advantages  in  transportation,  or, 
better  than  all,  the  control  of  the  home  supply  of  the  ar- 
ticles covered  by  the  tariff  discriminations.  A  trust  mo- 
nopoly based  solely  upon  transportation  franchises,  re- 
bates, or  discriminations  is  relatively  transient,  as  fran- 
chises are  nearly  all  limited  in  duration  and  rebates  are 
more  or  less  uncertain,  as  they  may  be  disturbed  by  law 
or  discontinued  from  many  causes.  But  a  trust  monopoly 
based  upon  a  monopoly  of  the  natural  sources  of  supply  is 
built  upon  a  rock  and  will  endure  as  long  as  the  estab- 
lished order  is  maintained.  Such  a  trust  monopoly,  as  the 
Standard  Oil  Company,  naturally  draws  to  itself  railroad 
rebates  and  discriminations  (the  Standard  Oil  Company 
possessed  these  at  the  beginning),  the  ownership  of  fran- 
chises, the  advantages  of  protective  tariffs,  and  the  differ- 
ential benefits  of  patents  in  the  processes  and  contrivances 
of  production.  The  trust  monopoly  in  the  anthracite  coal 
regions  is  of  the  same  nature,  and  the  bituminous  coal  fiehls 
are  fast  falling  into  the  hands  of  a  similar  all-inclusive 
trust  monopoly. 

If  the  people  really  want  to  destroy  these  so-called 
"trusts,"  they  must  abandon  the  fiction  of  taxing  the  cap- 
ital stock,  the  bonds,  and  the  working  plants  of  these  great 
corporations,  and  apply  the  whole  power  of  taxation  to 
the  monopolistic  feature  that  is  the  basis  of  them  all. 
With  the  full  program  of  bisocialism  in  force,  with  its 


378  BISOCIALISM— POLITICAL   ECONOMY 

absorption  into  the  public  treasury  of  the  differential  val- 
ues of  the  natural  opportunities  owned  and  controlled  by 
them,  not  one  of  these  trust  monopolies  could  survive  a 
single  year.  The  exemption  of  the  working  plants  and 
the  products  of  such  enterprises,  together  with  the  cheap- 
ened price  of  the  natural  opportunities,  would  create  such 
an  impetus  in  these  fields  of  industry  as  the  world  has 
never  seen.  Labor-power  would  be  in  great  demand,  and 
coal  and  oil  would  be  both  plentiful  and  cheap. 

There  is  an  economic  reason  for  the  complete  socializa- 
tion of  railroads  and  all  other  transportation  facilities  by 
means  of  governmental  ownership,  operation  and  control. 
It  is  in  this  way  only  that  the  disutility  of  distance  may  be 
overcome  as  between  different  communities,  and  that  all 
producers,  with  regard  to  this  disutility,  may  be  put  upon 
a  plane  of  substantial  equality.  This  is  also  the  only 
means  of  progressively  raising  the  normal  economic  margin 
after  it  has  been  restored  through  the  socialization  of 
all  ground  values. 

But  there  is  no  economic  reason  for  the  complete  social- 
ization of  mining  and  oil-producing  enterprises  in  a  man- 
ner involving  governmental  ownership,  operation  and  con- 
trol. All  of  the  equality  of  opportunity  possible  in  these 
enterprises  will  be  brought  about  when  ground  values  and 
transportation  facilities  have  been  fully  socialized.  But 
if  it  be  conceded  for  the  sake  of  argument  Ihat  after  such 
socialization  of  ground  values  and  of  the  means  of  trans- 
portation, conditions  may  still  arise  which  justify  or  de- 
mand governmental  ownership,  operation  and  control  of 
mining  and  oil-bearing  land-forms  on  the  ground  of  ex- 


OF  THE  INDIVIDUALIZATION  OF  VALUES         379 

pediency,  yet  the  complete  socialization  of  their  ground 
values  must  first  be  accomplished. 

It  is  idle  to  talk  of  the  government  taking  over  either 
mining  properties  or  private  land-forms  furnishing  trans- 
portation facilities,  until  the  prices  of  all  land-forms  have 
been  reduced  to  their  values  for  present  use  and  occupa- 
tion. It  would  be  economically  unwarranted  for  society 
as  a  whole  to  pay  to  present  beneficiaries  of  its  special 
privileges  the  present  values  of  land-forms.  The  present 
values  of  all  land-forms  are  based,  not  upon  their  utilities 
for  the  present  productive  purposes  alone,  but  also  i;pon 
ihcir  utilities  for  future  monopoly  and  speculative  pur- 
poses. Society  as  a  whole  by  its  institutions,  laws  and 
customs  has  given  to  land-forms  all  the  values  which  they 
possess  in  excess  of  one  year's  ground  rent  in  each  case. 
By  a  change  of  its  institutions,  laws  and  customs  to  the 
extent  of  adopting  the  program  of  bisocialism,  society  can 
not  acquire  and  retain  the  differential  values  of  its  land- 
forms;  these  values  under  bisocialism  will  simply  disap- 
pear. When  they  have  disappeared,  and  not  till  then,  so- 
ciety can  acquire  land-forms  for  the  purpose  of  direct 
socialization  without  buying  from  its  beneficiaries  that 
which  it  has  distinctively  created  and  given  them  without 
any  consideration  whatsoever.  So  that  if  public  ownorsliip 
of  mines  and  oil  fields  is  eventually  to  be  adopted,  the  full 
socialization  of  their  ground  values  is  necessarily  the  first 
step ;  it  can  not  be  dispensed  with  in  any  event.  But  Eco- 
nomic Science  clearly  points  to  the  individualization  of  all 
-uch  productive  enterprises,  subject  only  to  the  socializa- 
tion of  all  ground  values  every  year. 


CHAPTEE  XIV. 

OF   INADEQUATE    REFORilS   AND   REMEDIES. 

National  prosperity  and  rich  crops  have  not  thus  far  helped 
the  widow  and  the  orphan.  High  prices  only  make  poverty 
more  pinching.  The  hard-earned  dollars  buy  so  pitifully 
little.  Isabelle  Horton. 

From  an  economic  point  of  view  the  supreme  test  of 
every  proposed  social  reform  or  remedy  is  this:  Does  it 
tend  to  raise  the  economic  margin?  If  it  does,  then  to 
this  extent  it  will  permanently  benefit  the  whole  people. 
If  it  does  not,  its  benefits  are  limited,  at  best,  to  a  part  of 
the  people,  and  its  ultimate  effect  is  usually  to  depress 
the  margin.  While  such  a  movement  may  benefit  those 
who  are  immediately  engaged  in  it,  or  are  the  direct  ben- 
eficiaries of  it,  the  condition  of  those  who  are  below  these 
in  the  economic  scale  is  made  relatively  worse.  It  is  the 
purpose  of  those  engaged  in  a  given  social  reform  move- 
ment to  obta,in  better  conditions  for  a  certain  class  of  peo- 
ple. But  in  spite  of  all  that  is  done  the  differential  priv- 
ileges which  made  these  people  its  victims  by  depressing  the 
margin  still  remain;  and  as  long  as  they  exist  a  part  of 
their  baleful  effects  may  be  shifted  from  some  persons  to 
others  better  able  to  bear  them,  but  the  burden  as  a  whole 
is  in  no  wise  lifted. 

Since  the  Civil  War  there  have  been  in  the  United 
States  several  movements  of  a  reform  nature  that  have 
attracted  wide  attention.     Some  of  these  have  sought  to 

380 


INADEQUATE  REFORMS   AND   REMEDIES         381 

benefit  large  numbers  of  people  by  reforming  persons 
themselves,  as  in  case  of  the  temperance  movement.  Others 
have  sought  to  benefit  the  same  class  of  people  by  changing 
their  environment  in  so  far  as  it  influences  their  personal 
habits,  as  in  case  of  the  crusade  for  the  prohibition  of 
the  liquor  traffic.  Other  reforms  have  sought  to  modify 
the  laws  of  the  State  which  affect  certain  economic  condi- 
tions, without  proposing  any  fundamental  economic 
changes,  as  in  case  of  the  greenback,  populist,  free  trade, 
and  free  silver  agitations.  While  still  other  reforms  seek 
to  affect  economic  conditions  by  the  cooperative  action  of 
certain  classes  of  people,  the  personal  habits  and  social 
environment  of  the  people  and  the  laws  of  the  State  re- 
maining substantially  the  same.  These  reforms  are  ex- 
emplified by  the  grange  movement  of  the  early  70's  and 
by  the  present  day  organization  of  trade  unions. 

None  of  these  movements  is  devoid  of  merit,  and  all 
are  the  results  of  strivings  for  better  things.  Some  of 
them  are  highly  meritorious  in  themselves  and  have  en- 
listed the  sympathies  and  labors  of  many  very  commend- 
able men  and  women.  But  neither  singly,  nor  in  any  com- 
bination, nor  all  together  can  they  solve  the  economic  prob- 
lem. Each  involves  a  glimpse  at  least  of  a  great  truth, 
but  not  one  of  them  has  even  paved  the  way  for  the  vital 
and  all-inclusive  step  which,  when  taken,  will  benefit  all 
men  by  raising  the  economic  margin. 

It  is  but  a  repetition  of  former  discussion  to  say  that 
the  inculcation  of  temperate  habits  among  the  poor,  while 
it  benefits  them  morally  and  physically  as  individuals,  does 
not  tend  to  raise  the  economic  margin,  but  rather  to  de- 


382  BISOCIALISM— POLITICAL   ECONOMY 

press  it.  Anything  which  renders  a  neighborhood  more 
desirable  for  residence  purposes  tends  to  increase  its 
ground  rents.  The  higher  the  ground  rents  the  greater 
the  ground  values  to  those  who  desire  to  own  their  own 
homes.  Under  the  present  system  of  taxation  and  land 
tenure  a  sober,  thrifty,  and  industrious  people  are  fined 
by  increased  cost  of  living  for  maintaining  these  virtues. 
It  is  a  mistake  to  assume  that  drunkenness  is  a  prime 
cause  of  poverty;  rather  is  it  true  that  poverty,  or  at 
least  that  economic  condition  which  breeds  poverty,  is  a 
prime  cause  of  drunkenness.  These  facts  are  beginning 
to  be  understood  and  appreciated  by  some  of  those  who 
have  consecrated  their  lives  to  the  temperance  and  pro- 
hibition movements.  In  her  later  years  Miss  Frances  E. 
Willard  stated  over  her  own  signature  that  "The  present 
economic  condition  of  the  country,  the  misery  of  the  mil- 
lions of  our  people,  the  vast  number  of  the  unemployed, 
and  the  still  larger  number  forced  into  unnatural  em- 
ployment at  small  wages,  call  for  reforms  which,  if  they 
could  but  be  brought  about,  would  vastly  diminish  the 
tendency  to  drink."  And  in  speaking  of  the  proposal  of 
Henry  George  for  the  appropriation  of  ground  rent  for 
the  sole  revenue  of  the  State,  she  said  that  she  recognized 
in  this  movement  "an  effort  to  establish  a  principle  which, 
when  established,  will  do  more  to  lift  humanity  from 
the  slough  of  poverty,  crime  and  misery  than  all  else;  and 
in  this  I  recognize  it  as  one  of  the  greatest  forces  work- 
ing for  temperance  and  morality."  * 

*  Letter  to  Chicago  Question  Club,  September,  1894.     Pub- 
lished by  the  Club. 


INADEQUATE   REFORMS   AND    REMEDIES         383 

In  the  first  of  these  quotations  Miss  Willard  grapliieally 
pictured  the  results  of  a  depressed  economic  margin,  and 
distinctly  showed  that  she  realized  that  the  depression  was 
unnatural  and  caused  by  some  force  outside  the  victims 
themselves  and  beyond  their  control.  In  the  second  pass- 
age quoted  she  did  not  hesitate  to  recognize  and  advocate 
the  adoption  of  the  remedy  that  will  do  more  than  "all 
else"  to  extirpate  poverty,  crime  and  misery.  This  is 
strong  language  and  shows  that  she  fully  appreciated  the 
fact  that  the  socialization  of  ground  values  in  taxation  is 
the  fundamental  economic  reform. 

The  temperance  movement  made  its  appeal  to  the  in- 
dividual, and  sought  simply  to  change  him  and  his  habits. 
The  prohibition  movement  goes  further  than  this,  and 
recognizes  that  the  evil  of  intemperance  has  a  social  and 
economic  aspect ;  consequently  its  appeal  is  made  not  alone 
to  the  individual,  but  also  to  the  makers  of  the  law.  For 
this  reason  the  prohibition  movement  has  entered  the  field 
of  political  action. 

Another  agitation  for  reform  which  necessarily  entered 
the  field  of  politics  was  the  greenback  movement.  This 
movement  had  behind  it  the  great  economic  fact  that  the 
government  can  issue  and  maintain  at  par  paper  money 
to  the  amount  of  its  current  annual  expenditures  without 
any  means  of  redemption  other  than  the  full  and  free 
acceptance  of  such  currency  in  receipt  of  taxes.  This  fact, 
however,  was  never  clearly  seen  by  the  greenbackers  them- 
selves, and  their  party  platforms  and  recognized  literature 
were  burdened  with  projects  for  the  issuing  of  ton  lame. 
and  even  of  unlimited  amounts  of  paper  money  without 


384  BISOCIALISM— POLITICAL   ECONOMY 

any  feasible  plan  for  redemption  at  all.  Besides  this,  the 
greenbackers  attempted  to  create  a  primary  reform  in  a 
matter  of  secondary  importance.  The  money  question, 
however  grave,  is  not  the  fundamental  economic  question. 
An  improved  or  even  a  perfect  currency  system  constitutes 
but  an  additional  advantage  of  good  government,  and  its 
measurable  benefits  will  inevitably  be  reflected  in  ground 
rents  and  ground  values,  and  will  surely  inure  to  those 
who  are  enabled  by  law  to  appropriate  and  enjoy  these 
forms  of  value.  This  is  also  true  of  all  the  measurable 
benefits  which  would  accrue  from  the  remedies  proposed 
by  tariff  reformers  and  by  the  advocates  of  the  free  and 
unlimited  coinage  of  silver  at  the  existing  ratio  of  16  to  1. 
It  may  be  admitted  that  metallic  money  based  upon  two 
barter  metals  is  less  subject  to  monopoly  and  to  private 
manipulation  in  various  ways  than  if  based  upon  a  single 
metal,  and  that  the  parity  of  the  two  metals  could  be 
maintained  indefinitely  by  arbitrarily  making  both  an 
unlimited  legal  tender  for  all  purposes  public  and  private. 
But  the  bimetallic  standard,  if  adopted  and  successfully 
maintained,  would  not  conform  to  the  true  economic 
standard  of  value.  It  would  still  practically  ignore  the 
disutilities  of  space  and  time.  In  itself  it  would  con- 
tain no  distinct  recognition  of  the  greatest  of  all  monetary 
principles — the  principle  of  government  credit-forms  re- 
deemable in  receipt  for  taxes. 

The  distinguishing  feature  of  the  populist  movement 
in  addition  to  its  demand  for  "fiat/'  or  practically  irre- 
deemable paper  money,  is  its  demand  for  the  loaning  of 
this  money  to  the  people,  particularly  to  farmers,  at  a  rate 


INADEQUATE  REFORMS   AND    REMEDIES        385 

of  interest  much  below  the  ordinary  commercial  rate. 
This  was  one  way  in  which  the  large  increase  of  paper 
money  was  to  be  put  into  circulation.  Another  way  was 
through  the  erection  by  the  government  of  great  public 
works.  Neither  of  these  plans  has  any  economic  basis. 
If  the  money  were  loaned  by  the  government,  as  demanded, 
upon  the  ordinary  basis  for  security,  those  who  needed 
money  the  most  could  get  none  at  all,  while  those  who 
needed  it  the  least  could  get  it  readily.  What  the  people 
need  is  not  the  loan  of  money  by  the  government  at  any 
rate  of  interest,  high  or  low,  but  an  opportunity  to  pro- 
duce upon  a  normal  margin.  To  the  man  upon  an  arti- 
ficially depressed  economic  margin  the  gift  of  a  mere  ad- 
vantage in  interest  rates  would  do  no  permanent  good. 
The  advantage  would  be  taken  from  him  in  increased 
ground  rents. 

The  effect  of  government  expenditures  for  public  works 
is  too  well  known  to  require  statement.  It  is  to  increase 
the  value  of  all  land-forms  in  the  vicinity  of  such  works 
to  the  differential  advantage  of  the  land  owners,  as  own- 
ers, and  without  any  measurable  benefit  whatever  to  the 
land  users,  as  users.  The  inevitable  result  is  an  increase 
of  ground  rents.  Bisocialism  would  expend  money  for 
public  works — much  more  than  at  present.  But  it  would 
appropriate  substantially  all  of  the  increased  value  of 
neighboring  land-forms  in  the  reimbursement  of  the  State 
for  its  expenditures  and  for  further  improvements  for  the 
benefit  of  all  the  people. 

The  agitation  in  favor  of  lower  tariff  does  not  involve 
any  fundamental  reform,     On  the  other  hand,  it  tends  to 


386  BISOCIALISM— POLITICAL  ECONOMY 

perpetuate  the  established  order  by  making  it  a  little 
more  tolerable  for  certain  classes  of  producers.  It  calls 
for  a  tariff  for  revenue  only;  the  true  economic  reform 
calls  for  no  tariff  at  all.  The  working  plan  of  bisocial- 
ism  recognizes  a  natural  source  of  revenue  for  the  State, 
and  provides  a  simple  means  by  which  this  source  may 
be  utilized,  A  tariff  for  "revenue  only"  creates  artificial 
differential  privileges  which  some  may  enjoy  at  the  ex- 
pense of  others.  The  socialization  of  ground  value  for 
revenue  not  only  fails  to  create  any  artificial  differentials, 
but  it  serves  to  obliterate  all  natural  differentials  and  to 
put  all  men  upon  a  plane  of  equal  external  opportunities. 

It  has  been  shown  in  a  former  chapter  that  neither  the 
principles  nor  the  working  plan  of  bisocialism  recognizes 
as  beneficent  the  creation  of  differential  privileges  for  the 
so-called  protection  or  encouragement  of  home  industry. 
If  all  the  institutional  shackles  were  removed  from  indus- 
try and  exchange,  and  men  were  allowed  to  produce  freely 
upon  a  normal  and  normally  improved  economic  margin, 
home  industry  would  need  no  further  protection  or  en- 
couragement. In  the  meantime,  during  the  transition  pe- 
riod, if  the  people  so  desire,  the  so-called  protective  prin- 
ciple can  be  carried  out  as  hereinbefore  described  without 
any  reference  whatever  to  the  system  employed  in  taxation. 

Aside  from  the  temperance  movement,  which  appealed 
to  the  individual,  and  the  other  movements  mentioned, 
which  have  involved  political  action,  two  other  movements 
of  general  interest  have  arisen  in  the  United  States  since 
the  Civil  War.  These  differ  from  all  the  others  in  this: 
They  seek  to  reach  their  respective  ends  neither  by  indi- 


INADEQUATE  REFORMS   AND    REMEDIES        387 

vidual  effort  and  reform  nor  by  direct  political  action : 
but  by  cooperative  and  concerted  action  to  change  eco- 
nomic conditions,  the  laws  of  the  State  remaining  sub- 
stantially the  same.  These  are  the  farmers'  movement, 
known  as  the  grange,  and  the  movement  among  wage  earn- 
ers by  virtue  of  which  they  have  formed  themselves  into 
trade  unions. 

The  grange  had  for  its  central  thought  and  purpose  the 
elimination  of  the  "middle  man."  Instead  of  selling  their 
grain  to  local  buyers,  farmers  undertook  to  ship  direct  to 
Chicago  and  other  great  grain  markets.  And  instead  of 
buying  their  agricultural  implements  and  other  supplies  of 
local  dealers  they  sought  to  buy  direct  from  the  factory 
and  the  wholesale  house  at  factory  and  wholesale  prices. 

In  doing  these  things  the  farmers  ignored  the  fact  that 
the  so-called  middle  man  has  economic  functions  to  per- 
form, chief  among  which  is  the  function  of  overcoming, 
for  others,  the  disutilities  of  space  and  time.  With  refer- 
ence to  shipping  their  own  grain  the  farmers  met  great 
obstacles  in  the  matter  of  getting  proper  shipping  facili- 
ties when  needed,  and  reasonable  prices  in  the  grain 
markets  for  storage  and  other  necessary  charges.  They 
were  willfully  discriminated  against  by  railroads  and 
warehouses  and  by  grain  buyers  in  the  central  markets. 
In  the  matter  of  purchasing  supplies,  cash  had  to  accom- 
pany the  order  in  most  cases,  so  that  comparatively  few 
working  farmers  could  take  advantage  of  this  plan.  At 
its  best  the  grange  movement  could  do  nothing  for  the 
marginal  farmer,  and  if  it  had  succeeded,  it  would  have 
resulted    in    increasing  ground   rents   and    the  prices   of 


388  BISOCIALISM— POLITICAL   ECONOMY 

farms.  The  next  generation  would  have  found  it  just  so 
much  the  more  difficult  to  get  access  to  the  soil.  Its  at- 
tempt to  eliminate  the  middle  man  and  his  net  value  from 
the  economic  field  stamps  the  grange  as  a  sporadic  step 
in  the  direction  of  omnisocialism. 

The  movement  toward  trade  unionism  is  somewhat  dif- 
ficult of  economic  analysis.  Its  principles  have  not  always 
been  definitely  and  clearly  stated,  and  its  working  plan 
does  not  always  harmonize  with  the  statement  of  its  prin- 
ciples. Nor  is  the  attitude  of  trade  unionism  toward 
current  economic  conditions  always  the  same.  At  some 
times  the  tendency  is  toward  the  strike  as  the  first  and 
most  effective  means  for  the  enforcement  of  its  demands; 
at  other  times  it  advocates  arbitration  as  the  chief  means 
of  attaining  its  ends.  At  some  times  it  is  headstrong, 
willful  and  even  arrogant;  at  other  times,  moderate,  con- 
ciliatory and  even  meek  in  the  presentation  of  its  claims 
for  recognition.  It  is  born  of  false  economic  conditions, 
and  it  adopts  the  means  nearest  at  hand  for  opposing  these 
conditions,  without  any  considerable  inquiry  as  to  first 
causes  or  ultimate  remedies.  Many  of  its  leaders  adopt 
the  views  of  the  standard  economists  and  look  upon  the 
conditions  which  now  exist  as  the  natural  outcome  of  a 
necessary  struggle  for  existence,  and  maintain  that  no 
permanent  remedy  is  either  possible  or  desirable.  They 
utterly  ignore  the  difference  between  the  struggle  of  man 
with  nature  under  normal  conditions,  which  uplifts  and 
ennobles  him,  and  the  struggle  of  man  with  man  in 
abnormal  conditions,  which  degrades  and  embrutes  him. 
Tn  the  midst  of  a  world  in  which  millions  are  daily  in 


INADEQUATE   REFORMS    AND    REMEDIES         389 

want  or  the  fear  of  want,  and  in  which  human  misery  is 
so  great  as  to  convince  Professor  Huxley  that  the  "advent 
of  some  kindly  comet  which  would  sweep  the  whole  affair 
away"  would  be  a  desirable  consummation  in  the  absence 
of  any  other  remedy,  sonic  of  these  leaders  of  labor  are 
actually  afraid  lest  the  people  might  acquire  the  means  of 
satisfying  their  desires  with  too  little  exertion.  Says  one 
of  their  number: 

"Whatever  there  may  be  of  truth  in  any  and  all  theories 
the  trade  unions  will  strive  to  attain,  but  that  there  is  a  final, 
a  full  solution  of  the  labor  question  we  deny.  *  *  *  To 
those  men  and  those  women  who  are  seeking  for  a  solution  of 
this  great  labor  question  in  its  entirety  I  would  advise  that 
they  turn  their  attention  to  the  problem  of  perfecting  a 
mechanism  for  perpetual  motion,  or  seek  the  fountain  of 
endless  youth.  I  have  no  hope  or  even  a  desire  that  this  great 
question  shall  be  solved.  For  should  that  day  ever  come  to 
humanity,  all  incentive  for  activity  and  progress  would  be  at 
an  end  and  the  race  would  either  go  back  to  savagery  or  dis- 
appear from  the  face  of  the  earth."* 

In  all  the  realm  of  literature  there  is  no  better  special 
plea  for  the  preservation  of  the  established  order  sub- 
stantially as  it  exists  than  this.  And  yet  these  words  were 
spoken  by  a  man  who  is  the  accredited  representative  of 
thousands  of  those  victims  of  the  established  order  who 
seek  relief  through  trade  unionism.  His  demands  at  pres- 
ent are  higher  wages  and  an  eight-hours  day.  To-morrow 
and  next  year  the  demand  will  be  different,  perhaps,  if 
these  are  attained,  but  care  is  to  be  taken  to  keep  the 
laborers  from  acquiring  too  much  leisure. 


*  John   B.   Lennon,   Secretary    Journeyman    Tailors'   Union 
of  America  and  Treasurer  American  Federation  of  Labor. 


300  BISOCIALISM— POLITICAL   ECONOMY 

The  doctrine  of  the  foregoing  quotation  is  based  upon 
the  assumption  that  in  order  to  settle  the  "great  labor 
question"  it  is  necessary  entirely  to  overcome  all  the  dis- 
utilities of  matter,  space  and  time,  and  to  reduce  all 
labor-forms  to  spontaneities.  This  is  not  true.  Such  an 
assumption  fails  to  make  any  distinction  between  the 
problem  of  creating  satisforms  and  the  problem  of  dis- 
tributing them.  Political  Economy  docs  not  exhaust  itself 
with  the  creation  of  satisforms.  This  is  primarily  a  ques- 
tion of  industrial  science.  There  has  been  no  lack  of 
progress  and  successful  achievement  on  that  score.  The 
prime  question  of  Political  Economy  is  to  determine  in 
what  manner  satisforms  which  are  created  by  modern  in- 
dustry can  justly  be  distributed  and  enjoyed.  It  is  not 
possible  now,  and  never  will  be,  to  produce  all  satisforms 
entirely  without  labor;  it  is  possible  now,  and  ever  will  be, 
to  divide  the  products  of  labor  in  a  just  and  proper  man- 
ner. This  is  the  "great  labor  problem" — to  give  to  the 
laborer  his  due  under  the  institutions,  laws  and  customs 
of  society.  To  hope  that  the  real  labor  problem  may 
never  be  solved  is  to  hope  that  industrial  wars  shall  never 
cease  and  that  economic  justice  shall  ne'er  be  done. 

The  view  of  the  labor  problem  stated  in  the  above  quota- 
tion may  be  that  of  a  few  trade  unionists  who  draw  salaries 
fully  commensurate  with  their  abilities  and  services,  but 
it  is  not  that  of  the  rank  and  file  of  the  men  in  the  trade 
union  movement.  They  feel,  if  they  do  not  fully  under- 
stand, that  it  is  neither  the  "niggardliness  of  nature"  nor 
the  unalterable  decree  of  evolutionary  development  that 
stands  in  the  way  of  the  enjoyment  by  them  of  the  full 


INADEQUATE  REFORMS  AND  REMEDIES        391 

fruits  of  their  labor,  but  that  their  condition  is  the  result 
of  institutions,  laws  and  customs  of  society  which  are 
susceptible  of  change.  Their  leaders  must  offer  them 
something  more  than  a  perpetual  struggle  for  an  eight- 
hours  day  and  a  living  wage  in  order  to  retain  their  confi- 
dence and  support.  The  great  labor  problem  can  be 
solved — ^must  be  solved — but  it  must  be  done  in  such 
manner  as  to  give  to  the  laborer  his  due  as  a  matter  of 
right,  and  not  as  the  result  of  a  continuous  industrial  war- 
fare with  all  its  wastes,  its  hardships,  and  the  surrender 
of  individual  liberties  such  as  any  form  of  warfare  ex- 
acts from  the  members  of  an  organized  army.  When  the 
laborer  has  wrested  from  nature  the  products  of  his  toil, 
he  is  entitled  to  his  reward  without  engaging  in  a  per- 
petual warfare  with  the  beneficiaries  of  legal  privilege, 
however  successful  he  may  be  in  carrying  on  such  war. 
Success  attained  in  such  a  struggle  is  after  all  an  eco- 
nomic failure. 

As  conducted  at  present,  trade  unions  are  military 
rather  than  economic  organizations.  Men  who  have  no 
inclination  toward  them,  and  even  those  who  are  actually 
opposed  to  them  upon  principle  are  forced  to  join  them  in 
order  to  get  or  to  retain  work  and  to  avoid  social  ostracism. 
The  unions  often  enforce  their  demands  by  strikes  which, 
even  when  no  violence  is  used,  are  almost  as  destructive  to 
property  as  war.  Like  the  general  of  an  army,  the  leader 
of  great  labor  organizations  is  necessarily  an  autocrat. 
Like  any  other  autocrat  he  may  use  his  power  and  author- 
ity wisely  or  unwisely.  But  in  spite  of  this  autocracy 
where  democracy  should  rule ;  in  spite  of  the  warlike  do- 


393  BISOCIALISM— POLITICAL   ECONOMY 

structivencss  of  strikes;  in  spite  of  the  arbitrary  rules  by 
which  trade  unions  limit  the  number  of  apprentices,  the 
number  of  hours  a  man  may  labor  each  day,  the  amount 
which  he  may  do  in  an  hour  or  a  day  in  a  given  vocation ; 
in  spite  of  the  ostracism  of  the  non-union  man,  and  of 
the  boycott  of  the  business  man  who,  with  or  without  just 
cause,  falls  into  their  disfavor;  in  spite  of  all  these  things 
and  more,  if  trade  unionism  could  ultimately  solve  the 
labor  problem ;  if  it  could  bring  about  a  state  of  equality 
of  opportunity;  if  it  could  destroy  all  differential  privi- 
leges; if  it  could  raise  the  economic  margin  to  its  normal 
position  and  maintain  it  there;  if  it  could  do  any  or  all  of 
these  things,  its  shortcomings  could  be  overlooked  and  its 
methods  condoned. 

But  trade  unionism  alone  can  do  none  of  these  things. 
In  a  thousand  years,  unaided,  it  can  accomplish  not  one  of 
these  ends.  It  can  not  bring  about  equality  of  oppor- 
tunity; for  the  present  inequalities  are  created  or  main- 
tained by  law,  and  laws  can  be  changed  only  by  political 
action.  Trade  unionism  especially  disclaims  and  eschews 
political  action.  For  the  same  reason  it  can  not  destroy 
a  single  differential  privilege ;  at  the  best  it  can  only  make 
the  beneficiary  give  up  to  his  employes  a  part  of  his  dif- 
ferential gain.  The  consumer  would  still  suffer.  Labor 
unionism  can  not  raise  the  economic  margin.  The  mar- 
gin has  been  depressed  by  conditions  pertaining  to  land 
tenure,  and  land  tenure  is  distinctively  a  matter  of  law. 
But  aside  from  these  things,  trade  unionism  can  never 
improve  the  condition  of  the  man  who  receives  the  mar- 
ginal wage.     His  remuneration  is  controlled  in  the  labor 


INADEQUATE   REFORMS   AND    REMEDIES         ;i93 

market  by  the  product  of  the  self-employed  laborer  upon 
the  margin,  and  can  not  artificially  be  increased  and  suc- 
cessfully maintained  beyond  the  value  of  the  product  of 
this  marginal  laborer. 

No  movement  for  the  solution  of  the  labor  problem,  or 
even  for  the  amelioration  of  the  laborers'  condition  can 
long  succeed  that  does  not  extend  to  the  marginal  laborer. 
He  is  the  marginal  buyer  and  the  marginal  seller  in  every 
general  market.  He  is  the  determiner  of  prices  of  all 
labor-forms  and  the  ultimate  arbiter  of  all  wage  questions. 
If  the  trade  unionist  seeks  a  permanent  solution  of  the 
labor  problem,  let  him  support  his  organization  as  faith- 
fully as  he  may  in  all  its  laudable  endeavors,  but  let  him 
never  lose  sight  of  the  fact  that  as  a  trade  unionist  he  is 
opposing  artificial  condition  with  artificial  condition,  force 
with  force,  cunning  with  cunning.  He  is  a  warrior  in  a 
war  not  of  his  own  making  nor  of  his  personal  fault. 
While  the  war  lasts  it  may  be  his  duty  to  fight.  If  so, 
as  a  trade  unionist,  let  him  fight  prudently  and  valiantly. 
But  it  is  his  highest  duty  as  a  citizen  to  enter  the  field 
of  political  action  and  by  his  vote  to  bring  about  a  condi- 
tion of  affairs  in  which  industrial  wars  will  be  no  more. 
Let  him  remember  that  all  industrial  wars  are  man-made, 
and  that  in  the  realm  of  economics,  as  in  the  realm  of 
politics, 

"War's  a  game  which,  were  their  subjects  wise. 
Kings  would  not  play  at." 


CHAPTER   XV. 

OP  SOCIAL  DISUTILITIES. 

Man's  inhumanity  to  man 

Makes  countless  thousands  mourn. 

Robert  Burns. 

The  present  wretched  social  arrangements  are  the  only 
hindrances  to  the  attainment  by  almost  all  of  an  existence 
made  up  of  a  few  and  transitory  pains  and  many  and  various 
pleasures.  John  Stuart  Mill. 

In  the  early  part  of  our  investigation  we  found  that 
men  seek  to  satisfy  their  desires  with  the  least  exertion ; 
that  the  problem  of  production  is  to  devise  ways  and  means 
by  which  all  labor-forms  may  be  reduced,  as  nearly  as 
possible,  to  spontaneities.  Economics  gives  no  counte- 
nance to  any  theory  which  involves  the  idea  that  a  given 
project  is  to  be  commended  because  it  "makes  work"  for 
the  people.  In  normal  conditions  all  men  may  find  plenty 
of  work.  The  legitimate  question  of  economic  produc- 
tion is  not  how  to  make  as  much  work  as  possible,  but  how 
to  get  the  greatest  results  from  a  given  expenditure  of 
effort. 

To  the  satisfaction  of  man's  desires  through  the  exer- 
tion of  labor-power  nature  interposes  but  three  physical 
disutilities.  The  external  world  presents  to  him  mate- 
rial substances  suited  to  his  needs,  but  seldom  in  the  form 
of  spontaneities.     The  matter  which  he  proposes  to  put 

394 


OF  SOCIAL  DISUTILITIES  396 

to  use  must  first  be  changed  in  form;  or  it  must  be 
removed  to  another  place;  or  a  certain  time  must  elapse 
before  it  can  be  utilized.  Usually  all  of  these  elements 
are  involved,  though  one  or  the  other  distinctively  pre- 
ponderates. These  natural  checks  upon  enjoyment  which 
would  otherwise  be  spontaneous  we  have  called,  respec- 
tively, the  disutilities  of  matter,  space  and  time.  ^ 

The  distinctive  problem  of  industry  lies  in  overcoming 
the  disutility  of  matter.  By  mastering  the  laws  of  mat- 
ter and  force — two  phases  of  the  same  thing,  although 
apparently  opposite  in  character — men  may  not  only 
avoid  many  of  the  resistances  of  the  physical  world,  but 
may  even  turn  destructive  forms  and  forces  into  beneficent 
agencies  of  production. 

The  distinctive  problem  of  exchange  is  to  overcome,  as 
nearly  as  possible,  the  disutilities  of  space  and  time. 
From  an  economic  point  of  view  the  problem  of  industry 
is  comparatively  simple.  It  involves  chiefly  the  laws  and 
processes  of  the  physical  world.  But  exchange  is  more 
extensive  in  its  scope  and  more  complex  in  its  details.  It 
directly  involves  the  question  of  interest,  a  question 
which,  in  the  absence  of  the  market,  would  never  appear 
at  all.  It  first  brings  into  existence  and  then  forces  into 
the  highest  prominence  the  phenomenon  of  ground  rent. 

As  soon  as  men  begin  to  cooperate  in  industry  and  to 
compete  in  exchange  the  disutilities  of  matter,  space  and 
time  begin  to  assume  a  social  aspect.  In  normal  condi- 
tions one  man  ceases  to  produce  upon  his  own  account, 
and  enters  the  employment  of  another.  The  question  of 
his  compensation  at  once   arises.     He  naturally  asks  as 


396  BISOCIALISM— POLITICAL   ECONOMY 

much  as  he  could  obtain  by  self-employment,  and  need 
accept  no  less.  The  question  of  wages  emerges,  but  at 
this  stage  it  is  simplicity  itself. 

Soon  one  man  loans  certain  labor-forms  to  another  en- 
gaged in  industry  and  thus  enables  the  latter  to  overcome 
the  disutility  of  time  by  eliminating  the  necessity  of  wait- 
ing for  results  in  some  process  of  production.  Economic 
interest  here  emerges.  Finally  two  men  want  to  occupy 
the  same  land-form  at  the  same  time,  and  the  disutility 
of  space  forbids.  One  of  them  gets  possession  and  is 
powerful  enough  to  retain  it.  The  other  offers  him  a 
price  temporarily  to  surrender  his  advantage.  Thus  ground 
rent  emerges. 

In  all  of  these  instances  it  will  be  noted  that  while  the 
several  disutilities  have  assumed  a  social  aspect  they  are, 
at  bottom,  disutilities  of  nature.  They  are  not  of  man's 
making.  The  association  of  men  in  production  has  occa- 
sioned the  manifestation  of  wages,  ground  rent  and  in- 
terest, but  has  not  primarily  caused  the  disutilities  of 
matter,  space  and  time. 

When  government  has  been  instituted  among  men  the 
State,  by  means  of  its  institutions,  laws  and  customs,  may 
affect  disutilities  in  three  different  ways.  It  may  bring 
all  men  into  such  economic  relations  with  one  another  and 
with  their  physical  environment  as  to  lessen  all  physical 
disutilities  to  all  the  people;  or  it  may  favor  some  men 
at  the  expense  of  others  so  that  the  disutilities  of  nature 
will  be  lessened  as  to  the  former  and  increased  as  to  the 
latter;  or  it  may  create  new  disutilities  by  putting  upon 
a  part  or  all  of  the  people  burdens  of  which  nature  itself 


OP  SOCIAL  DISUTILITIES  397 

is  innocent.  We  shall  discuss  these  attitudes  of  govern- 
ment toward  people  and  property  in  inverse  order. 

A  man  is  born  into  the  world,  and  in  his  infancy  is  not 
distinguishable  from  a  ihousaiul  others.  His  parents  may 
be  people  of  riches,  of  ordinary  comfort,  or  of  poverty ;  of 
culture,  of  common  education,  or  of  ignorance.  He  grows 
to  manhood  in  association  with  his  fellows  having,  in  com- 
mon with  them,  the  heritage  of  all  the  history,  the  achieve- 
ments and  the  progress  of  the  race.  He  is  educated  in 
the  public  schools.  In  his  mature  years  he  invents  a  ma- 
chine or  a  process  which  greatly  diminishes  the  disutility 
of  performing  a  certain  task.  In  ordinary  circumstances 
his  invention  would  at  once  become  common  property,  and 
all  might  equally  benefit  thereby.  Nature  says  to  this 
man  that  by  his  invention  he  has  simply  interpreted  aright 
a  natural  law — a  law  which  he  did  not  create  and  which  he 
is  powerless  to  change.  The  accumulated  wisdom  and 
progress  of  centuries  has  enabled  him  to  do  this.  His 
immediate  environment  led  him  to  concentrate  his  thought 
upon  it.  In  the  desert  of  Sahara  or  the  wilds  of  Siberia 
his  feat  would  have  been  impossible.  Having  inherited 
from  all  the  past,  he,  in  his  turn,  is  enabled  to  add  to  the 
legacy  of  the  race. 

In  normal  conditions  all  men  would  be  free  to  adopt 
this  invention  and  thus  obey  the  economic  law  of  gravity 
by  which  they  are  impelled  to  satisfy  their  desires  with 
the  least  exertion.  But  the  State  interposes  an  artificial 
disutility.  It  grants  to  this  inventor  a  patent,  by  virtue 
of  wliich  he  can  prevent  his  generation  from  using  this 
improvement  in  production  at   all   unless  he   chooses  to 


398  BISOCIALISM— POLITICAL   ECONOMY 

put  it  upon  the  market.  If  he  puts  it  upon  the  market, 
he  or  his  assigns — usually  the  latter — are  enabled  to  erect 
and  maintain  an  artificial  barrier  between  the  people  and 
the  greatest  satisfaction  of  their  desires. 

In  justification  of  this  arbitrary  action  of  the  State,  it 
is  claimed  that  patent  laws  are  necessary  to  encourage  in- 
vention. There  is  nothing  to  support  this  contention. 
Inventors  are  born,  not  brought  into  existence  by  bribery. 
A  real  inventor  needs  no  more  incentive  to  bring  forth 
the  child  of  his  brain  than  to  propagate  his  race. 

But  even  if  this  claim  were  true,  the  existing  patent 
laws  are  wholly  unjustifiable.  If  the  present  generation 
is  indebted  to  one  of  their  number  for  giving  concrete 
expression  to  a  new  thought,  let  the  generation  as  a  whole 
pay  him  a  bounty,  having  some  relation  to  the  benefit 
which  he  confers.  Or,  let  it  fix  upon  a  royalty  which  any 
one  may  pay  or  secure  to  the  inventor,  and  then  manu- 
facture or  use  the  patented  article  or  process  to  his  heart's 
content.  By  the  existing  laws  the  State  gives  to  the  in- 
ventor letters  of  marque  and  reprisal  against  the  industry 
and  commerce  of  its  own  citizens.  This  is  indefensible  as 
a  matter  of  politics  as  well  as  of  economics.  A  patent 
right  is  an  artificial  disutility  created  by  the  State,  and 
under  bisocialism  it  would  be  destroyed  entirely,  or  it 
would  be  socialized;  it  would  not  be  allowed  to  interfere 
with  the  productive  enterprise  of  any  individual  in  an 
arbitrary  manner. 

Another  form  of  the  same  kind  of  artificial  disutility 
created  by  the  State  is  manifested  in  the  law  of  copyright. 
Xo  book  of  merit  was  ever  written  under  the  inspiration 


OF  SOCIAL  DISUTILITIES  390 

of  a  copyright,  nor  ever  will  be.  If  the  State  is  to  mak(^ 
a  discrimination  in  favor  of  authors,  let  it  do  so  in  the 
form  of  socialism.  If  their  work  is  distinctively  a  com- 
mon benefit,  let  the  disutility  of  maintaining  this  benefit 
be  socialized  like  the  cost  of  maintaining  the  public 
schools.  Let  us  have  systemic  socialism — not  sporadic 
socialism  here,  and  the  worst  form  of  economic  privateer- 
ing there,  in  regard  to  matters  of  the  same  economic 
import. 

Patents  and  copyrights  do  not  constitute  the  only  forms 
of  social  disutility,  nor  the  worst.  A  man  near  the  po- 
litical boundary  of  the  State  creates  a  labor-form  or  raises 
a  crop  and  can  get  the  greatest  satisfaction  of  desire  by 
exchanging  his  product  for  that  of  another  producer 
across  the  border.  But  the  State  says.  Nay!  It  erects 
between  these  two  men  a  legal  barrier  which  separates 
them  as  effectually  as  would  a  chain  of  mountains.  The 
economic  law  of  gravity  bids  them  exchange  their  prod- 
ucts. If  they  obey  its  dictates,  they  are  arrested  and 
brought  into  the  courts  of  their  respective  countries.  Eco- 
nomics says  to  them,  as  they  stand  at  the  bar:  "Well 
done,  thou  good  and  faithful  servants.  Go  thou  and  cre- 
ate other  utilities,  and  exchange  thy  products  freely." 
But  the  State  sends  them  to  jail. 

A  man  earns  a  competence,  and  thinks  that  he  can  sat- 
isfy his  desire  for  scenery  and  recreation  better  in  a  for- 
eign country  than  in  his  own.  The  State  permits  him 
to  go.  While  there  he  sees  manufactured  products  of  his 
own  country  for  sale  much  cheaper  than  at  home.  When 
he   prepare^   to   return    he    sees   that   he   can  satisfy  hi? 


4U0  BISOCIALISM— POLITICAL   ECONOMY 

desire  for  certain  articles  of  apparel,  jewelry  or  whatnot, 
with  less  disutility  by  buying  the  desired  articles  abroad 
than  by  buying  them  at  home.  He  obeys  the  economic  law 
of  gravity.  But  when  he  arrives  at  port  in  his  own  coun- 
try he  is  met  by  men  who  search  his  person,  ransack  his 
baggage,  and  often  administer  an  oath  with  one  hand 
while  extending  the  other  for  a  bribe.  After  such  an  expe- 
rience he  goes  forth  feeling  either  that  he  has  been  un- 
justly despoiled,  or  that  he  has  committed  the  crimes  of 
perjury  and  bribery.  Such  a  system  constantly  puts  be- 
fore the  custom  house  officers  and  employes  the  greatest 
temptations  and  incentives  to  venality,  and  leads  men  to 
the  corrupt  practices  of  perjury  and  bribery  who  would 
scorn  such  deeds  in  the  ordinary  affairs  of  business  life. 
But  even  when  honestly  administered  and  scrupulously 
obeyed,  tariff  laws  are  a  source  of  untold  annoyances, 
hardships  and  extortions. 

"On  the  slightest  suspicion  that  a  passenger  has  concealed 
dutiable  goods,  the  law  gives  absolute  power  to  the  customs 
officers  to  strip  the  suspected  person  naked;  and  this  power  is 
habitually  exercised.  *  ♦  *  The  oppressions  which  have 
been  practiced  upon  millions  of  poor  immigrants  arriving  in 
the  United  States  have  never  been  even  faintly  described. 
For  many  years  it  was  the  uniform  practice  to  make  them  pay 
enormous  taxes  upon  every  article,  however  trifling,  which 
they  had  not  actually  used  and  soiled.  Cases  are  well  known 
in  which  a  poor  woman,  who  had  only  one  pair  of  stockings 
(which  she  had  kept  clean  for  landing,  going  barefoot  on  the 
ship)  was  taxed  80  per  cent  on  this  pair;  and  men  having 
only  two  suits  of  clothing  have  been  taxed  upon  one  suit  more 
than  it  cost.  Nine  officers  reported  their  names  for  honorable 
mention,  on  their  joint  seizure  of  two  yards  of  flannel,  which 
a  poor  Irish  v.oman  kept  clean  until  her  arrival.    These  are 


OF  SOCIAL  DISUTILITIES  401 

but  small  Instances  of  vast  numbers  of  similai'  petty  and 
contemptible  extortions  which  are  carried  on,  not  from  corrupt 
motives,  but  in  zeal  for  the  enforcement  of  crooked  taxation."* 

But  the  iniquities  of  tariff  legislation  are  not  confined 
to  those  who  live  near  the  political  border,  those  who  go 
abroad,  and  those  who  immigrate.  Every  man  and  woman 
in  the  land  is  a  victim.  If  a  tariff  is  laid  upon  a  satis- 
form  which  is  not  produced  in  this  country,  the  disutility 
of  satisfying  a  desire  is  artificially  increased  to  all  the 
people.  If  a  tariff  affects  satisforms  produced  here,  the 
competition  of  foreign  trade  is  restricted  and  more  must 
be  paid  for  such  satisform,  whether  domestic  or  im- 
ported. Two  economic  evils  arise  from  this  fact.  The 
natural  law  of  the  market  which  reflects  the  price  fixed 
by  the  marginal  pair  is  interfered  with,  the  price  is  arti- 
ficially maintained,  and  all  the  people  lose  the  benefit  of 
the  socialization  of  utility  which  would  otherwise  result 
from  a  lower  price.  Again,  the  disutility  to  the  people 
as  consumers  is  not  confined  to  the  payment  of  higher 
prices  for  imported  satisforms.  All  domestic  satisforms 
of  the  same  class  are  sold  at  a  price  artificially  raised  and 
maintained  by  the  curtailment  of  full  and'  free  competi- 
tion. It  is  not  simply  the  amount  of  the  tariff  taxes  that 
is  taken  from  the  people.  The  money  paid  out  in  higher 
prices  for  domestic  satisforms  is  often  double,  and  not 
infrequently  is  five  or  six  times  the  amount  received  by 
the  government  as  revenue. 

It  is  claimed  that  the  money  thus  received  by  manufac- 
turers in  the  higher  prices  of  domestic  products  is  paid 

*  Thomas  G.  Shearman:     NaUiral  Taxation,  pp.  20,  21. 


402  BISOCIALISM— POLITICAL   ECONOMY 

out  again  to  domeslie  laborers  in  higher  wages.  If  this 
were  true,  it  would  furnish  no  economic  justification  for 
the  tariff  system ;  it  does  not  pay  to  rob  Peter  to  pay  Paul. 
But  it  is  not  true.  Wages  are  determined  by  the  return 
to  self-employed  labor  upon  the  economic  margin,  and 
every  differential  privilege  granted  to  others  tends  to 
diminish  the  opportunity  of  the  marginal  producers.  If 
there  were  any  increase  in  the  marginal  return  because 
of  the  tariff,  it  would  be  swallowed  up  in  ground  rent, 
■under  existing  land  tenure.  In  a  new  country,  such  as  the 
United  States,  general  wages  may  be  relatively  high  in 
spite  of  tariff  laws,  but  never  because  of  them. 

The  people  of  any  country  are  entitled  to  receive  and  to 
pay  the  normal  marginal  wage  for  each  respective  kind 
and  class  of  labor — no  more,  no  less.  Producers  are  en- 
titled to  receive,  and  consumers  to  pay,  the  normal  mar- 
ginal price  for  all  trade-forms  and  satisforms — no  more, 
no  less.  All  the  people  are  entitled  to  all  the  benefits  of 
all  the  socialization  of  utility  which  a  normal  market  af- 
fords. They  are  entitled  to  economic  as  well  as  to  per- 
sonal and  political  liberty.  They  are  entitled  to  apply 
their  labor-power  to  their  physical  environment  without 
the  interposition  of  any  artificial  barriers;  and  having 
done  this,  they  are  entitled  to  exchange  their  products 
where  and  with  whom  they  please.  When  they  have  over- 
come the  disutilities  of  nature  and  have  surmounted  the 
barriers  of  mountain  and  sea,  they  have  done  all  that 
economics  or  the  law  of  evolutionary  development 
demands. 

It  is  no  defense  of  the  tariff  system  to  say  that  the 


OF  SOCIAL  DISUTILITIES  403 

State  is  required  to  create  and  maintain  these  artificial 
disutilities  in  order  to  provide  for  itself  a  revenue.  Na- 
ture has  provided  the  State  with  a  source  of  revenue  dis- 
tinctively its  own.  The  land-forms  of  every  country  are 
recognized  as  having  been  originally  the  property  of  the 
whole  people.  In  the  first  instance,  land-forms  have 
always  been  held  by  the  people  in  their  collective  capacity 
or  by  the  government  representing  the  sovereignty  of  the 
State.  The  value  of  the  land-forms  of  any  country  is  the 
concrete  expression  of  the  measurable  benefits  which  so- 
ciety as  a  whole  confers  11/ on  its  individual  members. 
This  value  is  unearned  by  the  people  in  their  individual 
capacities.  It  is  a  collective  product,  and  belongs  of 
right  to  the  people  as  a  whole.  To  take  ground  value 
from  the  individual  who  has  distinctively  done  nothing 
to  create  it  is  not  to  add  a  single  disutility  to  his  pro- 
ductive efforts.  It  simply  puts  him  upon  a  par  with  the 
man  who  produces  upon  the  marginal  natural  opportunity. 
It  equalizes  the  disutilities  of  production,  leaving  to  the 
individual  every  increment  of  utility  which  is  distinctively 
his  own.     Said  John  Stuart  Mill : 

"Suppose  that  there  is  a  kind  of  income  which  constantly 
tends  to  increase,  without  any  exertion  or  sacrifice  on  the  part 
of  the  owners;  those  owners  constituting  a  class  in  the  com- 
munity, whom  the  natural  course  of  things  progressively 
enriches  consistently  with  complete  passiveness  on  their  own 
part.  In  such  a  case  it  would  be  no  violation  of  the  principles 
on  which  private  property  is  grounded,  if  the  State  should 
appropriate  this  increase  of  wealth,  or  part  of  it,  as  it  arises. 
This  would  not  properly  be  taking  anything  from  anybody; 
it  would  merely  be  applying  an  accession  of  wealth,  created 
by  circumstances,  to  the  benefit  of  Foriety.  instead  of  allowing; 


404  BISOCIALISM— POLITICAL   ECONOMY 

it  to  become  an  unearned  appendage  to  the  riches  of  a  par- 
ticular class. 

"Now  this  is  actually  the  case  with  rent.  The  ordinary 
progress  of  a  society  which  increases  in  wealth  is  at  all  times 
tending  to  augment  the  incomes  of  landlords;  to  give  them 
both  a  greater  amount  and  a  greater  proportion  of  the  wealth 
of  the  community,  independently  of  any  trouble  or  outlay 
incurred  by  themselves.  They  grow  richer,  as  it  were,  in 
their  sleep,  without  working,  risking  or  economizing.  What 
claim  have  they,  on  the  general  principle  of  social  justice,  to 
this  accession  of  riches?  In  what  would  they  have  been 
wronged  if  society  had,  from  the  beginning,  reserved  the  right 
of  taxing  the  spontaneous  increase  of  rent,  to  the  highest 
amount  required  by  financial  exigencies?"* 

This  language  is  used  by  Mill  in  an  argument  favoring 
the  appraisal  of  all  the  lands  in  England  with  a  view 
thereafter  to  take  all  increase  of  ground  value  for  the  pur- 
poses of  public  revenue. 

If  this  plan  were  adopted  in  the  United  States,  then 
to  the  amount  of  the  future  increase  of  ground  values 
taken  for  revenue,  the  disutilities  of  taxation  upon  labor 
values  and  capital  values  would  cease.  The  evils  of  the 
tariff  system  would  be  lessened,  but  not  destroyed.  Such 
a  step,  if  taken,  would  be  in  the  right  direction,  but  it 
would  be  only  a  step.  It  would  tend  to  raise  the  eco- 
nomic margin,  but  it  could  not  restore  it  to  its  normal 
position.  It  would  afford  no  opportunity  for  the  raising 
of  the  normal  margin  itself.  In  order  to  do  this,  all 
ground  values  must  be  socialized  and  public  utilities  must 
be  conducted  upon  a  flat  rate  basis  covering  only  actual 


•  Principles  of  Political  Economy,  Vol.  II,  Book  V,  Ch.  11, 
8  6. 


OF  SOCIAL  DISUTILITIES  405 

cost;  or,  better  yet,  all  such  utilities  should  be  free  in 
order  to  overcome,  so  far  as  possible,  the  disutility  of 
space;  for  the  element  of  transportation  enters  into  all 
public  utilities. 

Great  as  are  the  disutilities  imposed  upon  production 
by  the  present  system  of  taxation,  their  direct  effects  are 
small  compared  with  the  disutilities  of  the  established 
system  of  land  tenure.  In  order  to  satisfy  his  desires  by 
the  exertion  of  labor-power,  a  man  must  have  access  to 
the  opportunities  afforded  him  by  nature — at  least  for 
standing  room.  No  matter  what  may  be  his  energy,  abil- 
ity and  skill;  no  matter  to  what  extent  these  may  be  sup- 
plemented by  the  use  of  capital-forms,  he  is  helpless  un- 
less he  can  have  access  to  some  land-form.  If  he  is  de- 
nied all  access  to  land-forms,  he  is  confronted  with  an 
absolute  disutility  and  must  perish.  If  he  is  denied  ac- 
cess to  all  desirable  land-forms  except  upon  payment  of 
rent,  then  to  this  extent  a  disutility  is  placed  upon  the 
net  effectiveness  of  his  labor  and  capital;  to  this  extent 
his  labor  values  and  capital  values  must  be  reduced. 

To  a  certain  extent,  however,  this  disutility  is  produced 
by  nature.  It  can  not  be  evaded  entirely.  Two  men  can 
not  have  the  exclusive  possession  and  use  of  the  same  land- 
form  at  the  same  time ;  and  under  a  commercial  system  the 
man  who  is  permitted  to  possess  and  enjoy  a  desirable 
land-form  must  pay  ground  rent  or  ground  value  to  some 
man,  or  to  some  body  of  men,  for  the  differential  privi- 
lege. Ground  value  is  simply  capitalized  ground  rent 
paid  in  advance.  In  a  competitive  system  of  industry, 
ground  rent  in  one  form  or  the  other  is  a  fixed  charge  upon 


406  BISOCIALISM— POLITICAL  ECONOMY 

production.  It  must  be  paid,  and  its  payment  reduces  the 
rewards  of  labor  and  capital  by  just  so  much. 

Again,  the  expenses  of  government  constitute  a  fixed 
charge  upon  the  values  created  by  the  people,  and  must 
be  paid  out  of  the  results  of  current  production.  In  the 
established  order  the  disutility  of  gi-ound  rent  is  borne 
by  the  people,  and  is  paid  by  them  out  of  the  rewards  of 
their  industry  to  the  private  owners  of  the  land.  The 
disutility  of  supporting  the  government  is  also  borne  by 
the  people,  and  practically  from  labor  values  and  capital 
values.  The  amount  now  contributed  by  land  owners,  as 
owners,  is  doubtless  more  than  offset  by  the  sums  ex- 
acted from  the  people  in  indirect  taxation  which  never 
reach  the  public  treasury  at  all.  So  that,  on  the  whole, 
labor  and  capital  are  now  called  upon  to  meet  first  the 
disutility  of  ground  rent,  and  then  the  disutility  of  the 
maintenance  of  government. 

In  the  regime  proposed  by  bisocialism  labor  and  capital 
will  be  entirely  relieved  of  one  of  these  great  disutilities. 
Producers  will  continue  to  pay  ground  rent,  to  the  extent 
of  its  present  worth,  each  year.  But  this  will  be  paid 
directly  into  the  public  treasury  in  lieu  of  all  other  forms 
of  taxation.  Instead  of  supporting  a  class  of  landlords 
who,  as  stated  by  Mill,  "grow  rich  as  it  were  in  their  sleep, 
without  working,  risking  or  economizing,"  and  also  sup- 
porting and  sustaining  the  government,  capital  and  labor 
need  only  support  and  sustain  the  government  and  let  the 
landlords  seek  investment  in  productive  enterprises.  The 
disutility  of  ground  rent  is  natural  and  necessary;  the 
disutility  of  government  is  natural  and  necessary.     But 


OF  SOCIAL  DISUTILITIES  407 

nature  has  so  provided  that  these  disutilities  may  bo  met 
at  one  and  the  same  time  in  one  and  the  same  way. 
Ground  rent  may  be  taken  for  revenue.  Private  land- 
lordism under  the  present  tenure  has  no  basis  in  nature; 
it  is  wholly  an  artificial  disutility,  unnecessarily  created 
and  maintained  by  law.  It  is  a  social  disutility  and 
should  be  abolished,  even  if  its  abolition  did  not  involve 
the  solution  of  the  tariff  question  and  furnish  the  only 
natural  means  of  meeting  the  disutility  of  the  mainte- 
nance of  government. 

It  is  one  of  the  greatest  weaknesses  of  standard  Polit- 
ical Economy  that  it  is  forced  to  maintain  that  there  is 
no  natural  system  of  taxation;  that  there  is  no  natural 
source  of  revenue  for  the  State.  As  stated  by  Nordhoff, 
government  is  looked  upon  as  a  necessary  evil.  This  is  a 
conception  beside  which  the  anarchistic  doctrine  that  gov- 
ernment is  an  unnecessary  evil  is  logic  itself.  Professor 
Sumner  has  said  that  there  are  no  natural  laws  of  taxation. 
Professor  Perry  explicitly  declares  that  there  can  be  no 
science  of  taxation;  and  further,  that  "Nature  has  given 
no  whisper,  that  we  can  hear,  about  any  taxes."* 

To  the  same  effect  is  the  saying  attributed  to  the  cele- 
brated Colbert  that  the  act  of  taxation  consists  in  pluck- 
ing the  geese  in  such  manner  as  to  secure  the  greatest 
quantity  of  feathers  with  the  least  possible  amount  of 
squawking. 

In  exact  opposition  to  these  views,  bisocialism  teaches 
that  government  is  not  only  necessary,  but  that,  when 
rightly  administered,  it  is  also   positively   and  unquali- 

♦  Perry:     Political  Economy,  581  (20th  Ed.). 


408  BISOCIALISM— POLITICAL   ECONOMY 

ficdly  good;  and  that  nature  has  been  as  beneficent  to 
mankind  as  to  the  individual ;  to  the  body  politic  as  to  the 
individual  body ;  to  the  social  organism  as  to  the  organism 
of  the  individual  man.  Each  body,  each  organism,  has  a 
natural  source  of  sustenance.  In  normal  conditions  the 
State  is  neither  a  robber,  a  parasite,  nor  a  mendicant.  In 
normal  conditions  its  economic  function  is  not  to  create 
and  maintain  social  disutilities,  but  to  assist  all  its  citizens, 
in  every  possible  way,  to  overcome  the  natural  disutilities 
of  matter,  space  and  time. 


CHAPTER  XVI. 

OF    SOCIAL    SOLIDARITY. 

If  you  pass  by  the  least  considerable  man,  you  pass  by  all 
the  humanities  and  the  divinities,  and  set  your  heart  on  what 
is  transient  and  cheap.  There  is  a  wide  ocean  of  difference 
between  taking  in  the  last  man  and  leaving  him  out.  It  is 
not  a  question  of  one  man,  but  of  humanity. 

Charles  Ferguson. 

From  the  time  of  the  advent  of  man  upon  earth  one 
question  has  persistently  occupied  his  attention,  and  even 
now  most  insistently  presses  for  solution.  It  is  this: 
How  can  the  problem  of  individual  life  be  made  to  har- 
monize with  the  problem  of  social  life? 

When  a  man  in  isolation  undertakes  to  satisfy  his  de- 
sires by  the  application  of  his  labor-power  to  the  land- 
forms  about  him,  the  problem  that  he  must  ultimately 
solve  is  how  to  put  himself  into  the  best  possible  relations 
with  his  physical  environment.  At  this  stage  only  ques- 
tions of  physical  science  press  for  solution.  The  eco- 
nomic laAv  of  gravity  impels  him  to  take  advantage  of  all 
the  laws  and  forces  of  nature  so  far  as  he  is  able  to  under- 
stand and  control  them.  He  seeks  to  satisfy  his  desires 
with  the  least  physical  disutility.  This  economic  law  of 
gravity  is  the  basis  of  all  physical  progress  and  is  re- 
sponsible for  all  growth  in  the  development  of  physical 
processes  and  physical  sciences. 

But  in  ordinary  circumstances  man  does  not  satisfy  his 

409 


410  BISOCIALISM— POLITICAL   ECONOMY 

desires  in  isolation.  As  soon,  however,  as  production  and 
enjoyment  in  company  with  his  fellows  begins,  man  is 
confronted  with  a  social  environment  of  which  he  must 
take  note  either  to  his  advantage  or  disadvantage.  The 
problem  now  arising  is  how  to  put  himself  into  the  best 
possible  relations  with  his  physical  environment  and  his 
social  environment  at  one  and  the  same  time.  The  simple 
industrial  question  begins  to  assume  both  an  economic 
and  an  ethical  aspect. 

The  introduction  of  his  fellow  men  into  his  environment 
necessarily  compels  him  to  view  the  economic  law  of  grav- 
ity in  the  light  of  the  new  condition.  It  does  not  readily 
occur  to  him  that  the  new  condition  should  place  a  limita- 
tion upon  the  law  by  which  he  seeks  the  highest  satisfac- 
tion of  desire  with  the  least  effort.  Instead  of  applying 
the  new  condition  to  this  law,  he  is  prone  to  apply  the  law 
to  the  new  condition,  and  to  make  of  his  social  environ- 
ment an  instrument  for  the  better  satisfaction  of  his  own 
desires,  regardless  of  the  desires  of  his  fellow  men.  He 
exercises  his  labor-power  in  reducing  his  fellows  to  sub- 
jection so  that  he  may  enjoy  the  fruits  of  their  labor  as 
well  as  his  own;  and  finally,  so  that  he  may  enjoy  the 
fruits  of  their  labor  without  any  irksome  effort  of  his  own. 
In  doing  this,  he  may  become  their  ruler  as  well  as  task 
master,  and  in  such  case  there  is  introduced  to  the  world 
a  society  based  upon  the  lowest  of  all  social  ideals,  viz., 
the  ideal  of  self -enjoyment  at  the  expense  of  others.  Out 
of  this  ideal,  evolved  in  this  way,  have  grown  the  social 
disutilities  of  chattel  slavery,  serfdom,  the  social  and  eco- 
nomic enslavement  of  women,  monarchy,  military  despot- 


OF  SOCIAL  SOLIDARITY  411 

ism,  modern  wage  slavery,  private  landlordism  under  the 
present  tenure,  protective  tariffs,  monopolies  and  all  forms 
of  differential  power  and  privilege  created  and  maintained 
by  the  institutions,  laws  and  customs  of  society. 

But  this  barbaric  ideal  has  not  been  permitted  to  exist 
wholly  unquestioned  and  unchecked.  Gradually  there  has 
come  into  the  minds  of  men  a  higher  ideal  which  has 
found  its  best  expression  in  the  golden  rule.  This  is  the 
ideal  of  self -enjoyment,  not  at  the  expense  of  others,  but 
at  the  expense  of  self.  "Do  unto  others  as  ye  would  that 
others  should  do  unto  you."  If  this  ideal  were  engrafted 
upon  the  original  ideal  of  individual  selfishness  it  would 
change  the  economic,  law  of  gravity  into  the  economic 
law  of  equal  freedom.  The  law  of  equal  freedom  is  that 
in  any  state  of  society  every  man  should  be  able  to  satisfy 
his  desires  with  the  least  exertion,  provided  that  he  does 
not  thereby  interfere  with  the  equal  opportunity  of  every 
other  man  to  do  the  same. 

The  ideal  of  the  golden  rule — of  self-enjoyment  at  the 
expense  of  self,  of  loving  thy  neighbor  as  thyself — was 
given  to  the  world  in  its  highest  form  nearly  two  thousand 
years  ago.  A  few  souls  here  and  there  have  accepted  this 
ideal  and  have  actually  conformed  their  lives  to  its  teach- 
ing. To  most  men  of  to-day,  however,  the  golden  rule  is 
but  a  maxim,  Christianity  is  but  a  cult.  As  a  whole  men 
yet  seek  to  satisfy  their  desires  at  the  expense  of  others. 
The  teaching  for  two  thousand  years  of  the  sublimest 
truths  within  the  statement  and  comprehension  of  man  has 
resulted  in  a  refinement  of  the  means  by  which  one  man 
may  exploit  another,  but  in  the  realm  of  economics,  men 


412  BISOCIALISM— POLITICAL   ECONOMY 

to-day  no  more  conform  to  the  teachings  of  the  Just  One 
than  did  the  generation  that  nailed  Him  to  the  cross. 
Everywhere  even  now  there  exists  want  and  the  fear  of 
want  in  the  midst  of  plenty;  a  ceaseless  unrest  pervades 
the  working  classes;  with  every  increase  in  wages  goes  an 
increase  of  the  cost  of  living;  and  never  in  all  the  history 
of  the  world  have  there  existed  so  many  nor  such  gigantic 
fortunes  based  wholly  upon  differential  privilege — upon 
pure  and  unmitigated  greed — as  exist  to-day. 

But  the  laws  of  economic  life  can  not  be  violated  with 
impunity,  even  by  those  who  seek  to  profit  by  such  viola- 
tion. There  is  no  gain  to  the  beneficiaries  of  privilege 
except  that  which  may  be  measured  in  dollars  and  cents, 
and  in  the  ability  to  live  upon  the  unrequited  labor  of 
others.  Eiches  acquired  under  the  established  order  do 
not  bring  happiness,  but  power ;  not  pleasure,  but  leisure ; 
not  the  leisure  of  that  restfulness  which  the  soul  craves, 
but  of  restlessness  and  ennui.  The  man  who  wears  his 
life  away  in  piling  up  a  fortune  for  his  family  is  con- 
stantly tortured  by  the  thought  that  his  children  will  lose 
their  inheritance  either  through  their  own  dissipation  or 
through  the  knavery  and  cunning  of  others.  Hard  as  is 
the  lot  of  the  child  born  to  poverty,  his  chance  of  ultimate 
success  in  all  that  makes  life  worth  living  is  better,  on  the 
whole,  than  that  of  the  child  born  to  wealth  and  reared 
in  the  lap  of  luxury.  Nature  has  its  punishments  and  its 
compensations.  It  were  infinitely  better  for  a  man  to  die 
leaving  a  son  without  a  dollar  in  a  world  of  equality  of 
opportunity,  than  with  a  million  dollars  in  a  world  where 
all    natural    opportunities    have   been    appropriated,    and 


OF   SOCIAL  SOLIDARITY  413 

where  all  sorts  of  differential  privileges  are  created  and 
maintained  by  the  institutions,  laws  and  customs  of  so- 
ciety ;  where  the  whole  people,  instead  of  working  together 
for  the  purpose  of  overcoming  the  disutilities  of  the 
natural  world,  are  gathered  into  hostile  camps,  placing 
artificial  disutilities  in  one  another's  way;  where  in  a 
world  in  which  all  might  have  enough  and  to  spare,  the 
whole  tendency  of  the  times  is  toward  the  creation  and 
perpetuation  of  the  bitter  struggle  between  those  who 
thrive  above  and  those  who  exist  below  the  normal  eco- 
nomic margin. 

As  long  as  the  institutions,  laws  and  customs  of  the 
established  order  are  maintained  in  their  present  form  this 
condition  of  inequality  and  differential  privilege  will  con- 
tinue and  its  exploitations  will  increase.  The  established 
order  offers  everywhere  a  premium  upon  selfishness;  a 
pecuniary  reward  to  the  despoiler  of  the  labors  and  to  the 
destroyer  of  the  opportunities  of  others.  Not  only  private 
individuals,  but  separate  communities  look  upon  one  an- 
other as  legitimate  prey  in  the  great  struggle  for  suprem- 
acy. Nations  eye  one  another  with  jealousy  mingled 
with  hatred  and  fear,  and  enact  into  their  laws  so  far  as 
they  dare  the  sentiment  of  Voltaire:  "He  who  wishes 
the  good  of  his  own  country  must  inevitably  wish  evil  to 
other  countries."  This  is  the  underlying  principle  of  all 
so-called  protective  tariffs.  By  these  tariffs  the  people  of 
one  country  seek  to  satisfy  their  desires  at  the  expense 
of  the  citizens  of  foreign  countries.  This  is  but  a  social 
exemplification  of  the  lowest  of  all  economic  ideals,  viz., 
self-enjoyment  at  the  expense  of  others.     A  nation  calling 


414  BISOCIALISM— POLITICAL   ECONOMY 

itself  Christian  should  at  least  conform,  in  its  national 
and  international  polity,  to  the  ideal  enunciated  in  the 
golden  rule — self -enjoyment  at  the  expense  of  self. 

For,  mark  you,  the  golden  rule  is  not  the  basic  con- 
ception of  Christianity.  The  doctrine  of  the  golden  rule 
was  stated,  in  negative  form  it  is  true,  but  none  the  less 
clearly,  by  Confucius  four  centuries  before  the  Christian 
era,  and  again  by  Seneca  at  Rome  about  the  time  that 
Jesus  taught  in  Palestine.  The  ideal  which  Jesus  dis- 
tinctively gave  to  the  world  is  far  more  sublime  than  the 
ideal  of  the  golden  rule.  It  is  not  satisfied  with  simple 
self-enjoyment  at  the  expense  of  self.  It  is  not  based 
upon  self  enjoyment  at  all.  It  is  this:  Self-denial  for 
the  enjoyment  of  others;  self-sacrifice  in  order  that  others 
may  be  saved. 

This  is  the  highest  conception  of  life  that  it  is  possible 
for  man  to  attain.  We  have  already  stated  the  lowest  con- 
ception— self-enjoyment  at  the  expense  of  others.  Be- 
tween these  lies  the  ethical  (not  religious)  conception  of 
the  golden  rule — self -enjoyment  at  the  expense  of  self; 
do  as  you  would  be  done  by.  One  or  the  other  of  these 
conceptions  must  distinctively  govern  every  individual 
life.  One  or  the  other  of  these  conceptions  must  distinct- 
ively govern  the  social  and  economic  life  of  every  people. 
The  State  must  so  create  and  maintain  its  institutions, 
laws  and  customs  that  individual  life  may  harmonize  with 
social  life.    How  may  this  be  done? 

It  will  at  once  be  said  by  some  that  the  State  has  noth- 
ing to  do  with  the  religious  ideals  and  practices  of  its 
citizens — that  in  the  United  States,  especially,  any  action 


OF  SOCIAL  SOLIDARITY  416 

by  state  or  nation  in  this  behalf  is  forbidden  by  the  con- 
stitution. But  in  guaranteeing  religious  freedom  the  con- 
stitution itself  has  something  to  do  with  religion.  Any 
action  of  the  State  which  tends  toward  religious  freedom 
is  within  both  the  spirit  and  the  letter  of  the  constitution. 

The  constitution  of  the  United  States,  and  the  govern- 
ment under  its  sanction,  now  gives  to  every  citizen  full 
liberty  to  believe  and  to  teach  to  others  the  sublime  con- 
ception of  Jesus  of  self-denial  for  the  good  of  others;  but 
the  institutions,  laws  and  customs  of  the  established  order 
prevent  any  man  from  living  this  ideal.  No  man  can 
adopt  Christianity — real  Christianity  as  Jesus  exemplified 
it — as  a  life,  in  present  conditions,  and  socially  survive. 
He  will  become  an  outcast,  if  he  follows  in  the  real  foot- 
steps of  the  Master.  He  will  be  propertyless  and  will  be 
cast  into  prison  as  a  vagrant  under  the  law.  He  will  con- 
verse with  the  fallen  woman  at  the  public  drinking  place, 
and  will  say  of  the  woman  taken  in  adultery.  Let  him  that 
is  without  sin  cast  the  first  stone  at  her.  He  will  inveigh 
against  the  mad  struggle  for  property  and  power,  and 
advise  the  rich  young  man  to  sell  all  that  he  hath  and  give 
to  the  poor.  Without  hope  or  expectation  of  reward  he 
will  go  about  doing  good.  His  words  will  give  offense 
to  those  in  power,  and  his  mode  of  life  will  not  conform 
to  the  accepted  standards.  He  will  lay  bare  the  true  in- 
wardness of  the  hypocrite  and  drive  the  modern  money 
changers  from  the  temple.  Society  will  crucify  him ;  he 
can  not  live  a  life  of  self-denial  and  self-sacrifice  and  so- 
cially survive. 

The  reason  of  all  this  is  that  our  social  life  is  based  not 
upon  the  highest  of  our  economic  ideals,  but  upon  the 


416  BISOCIALISM— POLITICAL   ECONOMY 

lowest.  The  conception  that  it  shows  more  business  abil- 
ity, more  practical  acumen,  to  acquire  enjoyment  at  the 
expense  of  others  than  at  the  expense  of  self  dominates 
our  whole  economic  system.  Out  of  this  conception  and 
the  institutions,  laws  and  customs  of  society  based  upon 
it,  have  grown  numerous  and  flagrant  institutional 
wrongs.  Before  there  can  be  any  permanent  relief  from 
existing  conditions  these  social  wrongs  must  be  righted. 
It  is  not  enough  to  convert  the  individual  and  to  save  him 
from  his  own  sin  as  our  churches  now  attempt  to  do. 
Laudable  as  is  this  attempt  in  itself,  it  is  inadequate  in  its 
scope,  and  must  largely  prove  unavailing  and  abortive  as 
long  as  social  wrongs  are  left  untouched.  The  pulpit  can 
not  adequately  reach  the  pew,  if  the  occupant  of  the  latter 
is  either  the  beneficiary  or  the  victim  of  an  institutional 
wrong.  In  vain  is  preached  on  Sunday  the  uplifting  doc- 
trine of  the  fatherhood  of  God  and  the  brotherhood  of 
man  to  men  who,  on  week  days,  are  engaged  in  a  desperate 
struggle,  either  to  take  advantage  of  a  social  wrong  or  to 
escape  its  terrible  injustice.  And  this  is  as  it  should  be. 
Men  must  learn — not  only  out  of  the  pulpit,  but  in  it — 
that  from  social  sin  there  is  no  individual  salvation. 

Men  must  realize  that  on  the  voyage  of  life  we  are  all 
in  the  same  boat.  In  case  of  shipwreck  upon  the  high  seas 
we  honor  as  a  hero  the  man  who  does  not  attempt  to  save 
himself  until  all  his  shipmates  have  been  provided  with  the 
best  available  means  of  safety;  and,  on  the  other  hand, 
we  brand  as  a  coward  a  man  who  attempts  to  save  himself 
regardless  of  others,  and  as  a  fiend  one  who  attempts  to 
take   advantage   of   the   weaknesses   and    misfortunes    of 


OF   SOCIAL  SOLIDARITY  417 

others  in  order  to  enhance  his  own  chances  of  escape.  So 
it  must  become  in  the  great  voyage  of  life.  In  a  com- 
munity where  injustice  prevails  and  institutional  wrongs 
constantly  oppress  the  weak  and  unfortunate  in  this  life, 
the  man  who  selfishly  seeks  to  save  his  individual  soul  for 
a  life  to  come  has  a  soul  scarcely  worth  saving.  Let  him 
first  seek  social  salvation  at  the  altar  of  Justice;  he  may 
then  with  propriety  present  his  individual  soul  for  re- 
demption at  the  throne  of  Grace.  Let  him  do  what  he 
can  to  harmonize  social  life  with  his  highest  conceptions 
of  individual  life. 

In  the  establishment  of  this  harmony,  however,  the  indi- 
vidual is  not  all  in  all.  Social  wrongs  are  institutional; 
the  institution,  not  the  individual,  is  primarily  at  fault. 
Social  salvation  must  come  through  social  endeavor.  The 
State — the  active  agent  of  the  social  organism — must  do 
its  part.  Its  part  is  most  important,  but  it  is  as  simple 
as  it  is  momentous.  It  must  do  three  things,  and  do  them 
completely  and  well : 

The  State  must  prevent  its  citizens  from  acquiring  self- 
enjoyment  at  the  expense  of  others. 

The  State  must  compel  its  citizens  to  acquire  self-enjoy- 
ment only  at  the  expense  of  self. 

The  State  must  make  it  possible  (not  mandatory)  for 
its  citizens  to  practice  self-denial  for  the  good  of  others — 
to  practice  Christianity  as  a  life,  not  simply  to  accept  it  as 
a  cult — and  economically  and  socially  survive. 

The  adoption  of  the  principles  and  program  of  bi- 
socialism  will  enable  the  State  to  do  all  these  things. 
The  principles  of  bisocialism  condemn  without  qualifica- 


418  BISOCIALISM— POLITICAL   ECONOMY 

tion  or  extenuation  the  conception  that  men  should  seek  to 
satisfy  their  desires  at  the  expense  of  others.  It  incorpo- 
rates into  its  economic  law  of  equal  freedom  the  concep- 
tion that  among  persons  of  normal  ability  and  of  mature 
years  self-enjoyment  should  be  based  only  upon  self-en- 
deavor. And  its  ideal  is  to  bring  about  such  a  state  of 
society  as  will  enable  people  to  practice  the  highest  virtues 
without  punishment;  to  attune  their  lives  to  the  aspira- 
tion of  the  Lord's  Prayer:  Thy  kingdom  come  *  *  * 
on  earth  as  it  is  in  heaven. 

The  program  of  bisocialism  is  in  harmony  with  all  these 
principles.  It  proposes  to  put  all  men  upon  a  basis  of 
equality  of  opportunity  by  the  socialization  of  all  the  dif- 
ferential advantages  of  nature  as  fully  reflected  and 
measured  in  ground  values.  All  men  thus  having  equal 
access  to  natural  opportunities,  each  must  prosper  ac- 
cording to  his  own  endeavor.  In  industry  all  men  will 
produce  upon  the  level  of  the  man  who  must  occupy  the 
margin.  The  differential  gains  of  those  above  the  mar- 
gin, resulting  from  the  use  of  superior  natural  advan- 
tages, will  be  appropriated  by  the  State  in  taxation  and 
expended  for  the  common  good.  Tenants  of  superior 
land-forms  under  the  established  order  are  compelled  to 
pay  the  value  of  the  advantages  of  location  and  fertility 
to  their  respective  landlords,  and  thus  to  put  themselves 
upon  the  economic  plane  of  the  marginal  producer.  Bi- 
socialism will  extend  the  law  of  the  margin  to  land  owner 
as  well  as  land  user,  and  in  this  way  all  land  differentialb, 
as  among  individuals,  will  disappear. 

Under  bisocialism  not  only  will  the  man  who  has  the 


OF   SOCIAL  SOLIDARITY  419 

exclusive  use  or  control  of  a  natural  opportunity  pay  for 
the  privilege,  but  all  those  who  suffer  the  disutility  of 
standing  aside  while  he  uses  and  enjoys  will  be  recom- 
pensed through  the  socialization  of  ground  values.  The 
expenditure  of  these  ground  values  in  improved  and  cheap- 
ened— ultimately  free — public  utilities,  particularly  in  the 
matter  of  transportation,  will  progressively  raise  the  eco- 
nomic margin.  This  will  improve  the  condition  of  the 
marginal  producer,  and  through  him  all  others  will  be 
benefited.  Those  who  are  above  the  marginal  producer 
will  not  prosper  at  his  expense  as  now,  but  only  as  he 
prospers  and  because  of  his  prosperity.  Throughout  the 
entire  field  of  industry  there  will  be  manifested  the  feel- 
ing of  all-in-the-same-boativeness — the  elevating  influence 
of  social  solidarity. 

Under  bisocialism  no  man  can  acquire  any  artificial  ad- 
vantage over  another  under  the  sanction  of  the  law.  The 
State  will  destroy  all  existing  artificial  differentials  except 
such  as  will  expire  by  limitation  within  a  reasonable  time, 
and  will  refuse  to  renew  or  further  to  create  such  differ- 
entials. It  will  profit  no  man  anything  under  bisocialism 
to  attempt  to  acquire  a  differential  advantage  in  the  use 
of  land-forms,  because  the  full  market  value  of  such  ad- 
vantage will  be  taken  from  him  annually  in  taxation. 

Nor  under  bisocialism  will  it  specially  profit  any  com- 
munity to  secure  differential  advantages  in  the  way  of 
public  works  or  the  erection  of  public  buildings.  The 
present  day  scandals  of  river  and  harbor  bills  and  like 
laws  by  congress  or  legislature  for  the  expenditure  of 
public  moneys  will   cease.     The  financial  benefits  to  be 


420  BISOCIALISM— POLITICAL   ECONOMY 

derived  from  such  expenditure  will  at  once  be  reflected  in 
the  ground  values  of  the  favored  community,  and  its  peo- 
ple, in  the  course  of  years,  will  pay  into  the  public  treasury 
the  full  equivalent  of  all  the  financial  or  measurable  bene- 
fits received.  If  one  city  prospers  more  than  its  neigh- 
bors, its  prosperity  will  be  exactly  registered  in  its  ground 
values,  and  in  their  socialization  through  national  and 
State  taxation  all  less  fortunate  cities  will  share. 

Under  bisocialism  the  selfishness  which  now  impels  men 
to  violate  the  economic  law  of  equal  freedom,  and  to  sat- 
isfy their  desires  at  the  expense  of  others  will  have  no  sanc- 
tion in  the  institutions,  laws  and  customs  of  society.  That 
which  a  man  may  gain  through  inequality  of  opportunity 
will  either  be  forbidden  or  it  will  be  socialized  through 
the  public  appropriation  of  ground  value.  In  the  same 
way  the  selfishness  which  now  impels  communities  to  se- 
cure differential  advantages  by  means  of  national  and 
state  appropriations  of  public  funds  will  be  thwarted,  and 
persons  and  communities  alike  will  come  to  realize  that, 
advantage  or  no  advantage,  appropriation  or  no  appropria- 
tion, all  must  give  an  exact  equivalent  for  what  they  get. 
When  this  is  once  perceived  and  thoroughly  understood, 
people  individually  and  collectively  for  selfish  reasons 
will  drop  their  selfishness,  and  will  set  themselves  to  in- 
quire how  they  can  best  do  something  for  the  benefit  of 
those  who  occupy  the  margin. 

In  the  play  and  interplay  of  the  forces  governing  the 
established  order  the  sordid  selfishness  of  man  is  dominant 
and  generates  untold  individual  suffering  and  social 
wrong.     But  when  the  laws  of  industry  and  exchange  are 


OF   SOCIAL   SOLIDARITY  421 

understood  aright,  the  selfishness  of  man  will  save  him — 
individually  and  socially.  He  can  then  become  free  with- 
out placing  his  fellows  in  bondage;  he  can  put  away  care 
without  becoming  a  vagabond  and  witli  increase  of  seff- 
respect;  he  can  cooperate  with  his  fellows,  live  without 
strife,  and  laugh  at  want  and  the  fear  of  want — and  still 
be  a  human  being.  He  can  make  the  selfsame  selfishness 
which  curses  him  to-day  bless  him  to-morrow. 

In  order  to  attain  the  economic  redemption  of  man  it 
is  not  necessary  to  eliminate  from  his  life  the  element  of 
selfishness,  nor  to  change  human  nature  in  the  slightest 
degree.  It  is  necessary  only  to  realize  the  essential  ele- 
ment in  the  law  of  economic  life.  The  economic  forces 
of  tliis  world  are  so  ordered,  and  their  benefits  so  bestowed, 
that  true  egoism  and  the  highest  altruism  are  extremes 
that  meet.  Constantly  to  increase  the  opportunities  of 
the  man  who  is  at  the  bottom  of  the  economic  scale  is  at 
once  the  most  selfish  and  the  most  unselfish  of  all  eco- 
nomic polities.  Even  as  Jesus  said  to  His  disciples,  "He 
that  is  least  among  you  all,  the  same  shall  become  great," 
so  Economic  Science  says  to  its  votaries:  Behold  the 
MAN  AT  THE  MAEGIN  !    Let  him  reign  ! 


INDEX 


Abnormal  market,  79. 
Absolute  disutility,  70. 
Absolute  utility,  55. 
Aid-form,  71. 
Alternative  cost,   99. 
Alternative  cost,   point  of,  99. 
Anarchism,  17,  23. 
Anarchism,  definition  of,  20. 
Anarchists,  17,  259,  260. 
Anarchists,     evolutionary,     18, 

19. 
Anarchists,  revolutionary,  18. 
Auxiliary  capital,  130. 

Balance  of  trade,  275,  276. 
Banks    and    banking,    226,    227, 

358. 
Banks,  brokers,  etc.,  taxation 

of,  370,  371. 
Bimetalism,   384. 
Bisocialism,  29,  30,  31,  293,   306, 

316,  317,  318,  347,   364.  407. 
Bisocialism,   definition  of,   306. 
Bisocialism,    working  plan   of, 

300,  315,  345,  347,   352,  362,  386. 
Boehm-Bawerk,    E.    von,    189, 

190. 
Bureau  of  labor  statistics,  re- 
port of,  162,  368. 
Buyer,  capable,  66. 
Buyer,    marginal,    84,    145,    146, 

147. 

Canon  of  taxation,  Adam 
Smith's,  250,  251,  253,  254,  273. 

Canon  of  taxation,  true,  255, 
256,   257. 

Capable  buyer,  66. 

Capable  seller,  74. 

Capital,  130. 

Capital,  auxiliary.  130. 

Capital,  differential.  155.  156. 
295.  298. 

Capital,   pure,   130. 

Capital-form,   57. 


Capital  value,  131. 

Captains  of  industry,  308. 

Charity,  312,  313,  314. 

Collective  ownership,  26,  27. 

Commercial  disutility,  71. 

Commercial  utility,  69. 

Common  labor-power,  153,  196. 

Common  marginal  unit  of  dis- 
utility, 97. 

Common  marginal  unit  of 
utility,  92. 

Compensation,  319. 

Competitive  system,  31,  34,  117. 

Complex  monopoly,  238. 

Compound  monopoly,  238. 

Conflicting  theories,  23. 

Copyrights,  304,  398,  399. 

Cost,  97,  301. 

Cost,  alternative,  99. 

Cost  of  production,  124,  125, 
140,  269. 

Cost  of  reproduction,  125,  140, 
269. 

Current  credit-form,  76,  211, 
213. 

Current  debit-form,  76,  211. 

Current   trade-form,  76. 

Credit-form,  205. 

Credit-form,  current,  76,  211. 

Credits,  taxation  of,  372,  373. 

Dailor,    217,    219,    223,    227,    346, 

347. 
Debit-form,  204. 
Debit-form,  current,  76,  211. 
Desire,  35. 

Differential  capital  value,  295. 
Differential    labor    value,    155, 

295. 
Differential  land  value.  156. 
Differential  privilege,  228,  230, 

231. 
Differential    values,     142.    155, 

156,  228. 
Disutility,  42. 


423 


424 


INDEX 


Disutility, 
Disutility, 

S9. 
Disutility, 

unit  of, 
Disutility, 
Disutility, 
Disutility, 
Disutility, 
Disutility 

193.  346, 
Disutility 

193,  343, 
Disutility 

193,  343. 
Disutility, 
Disutility, 
Disutility, 
Disvalue, 


absolute,  70. 
commercial,   71,    87, 

common    marginal 
97. 

industrial,   71,   87. 
immeasurable,  97. 
marginal,    53. 
measurable,  97,  106. 
of   matter,   127,    128, 
395. 
of    space,    127,    128. 
346,   395. 

of  time,  127.  128,  129, 
346,   395. 

point  of,  43,  93,  94. 
relative,  70. 
social,   348. 
94. 


Economic  evolution,  345. 
Economic  equivalents,  100,  129. 
Economic      function      of      the 

State,  261. 
Economic  imperative,  258,  259, 

263. 
Economic    law   of  equal   free- 
dom, 300,  301,  411,  418. 
Economic   law   of   gravity,    63, 

276,    300.    399,   400,    409,   410. 
Economic  margin,  144,  265,  269, 

281,  294,   342. 
Economic    margin,   depression 

of,   264,   265,   266,   267,   268,   310, 

380. 
Economic  problem,  13,  16. 
Economics,    16,    105,     106,    126, 

394. 
Economic    science,    15,    16,    17, 

35,    38,    80,    106.    126,    259,    291, 

367,  379. 
Economic  science,  branches  of, 

16,   106. 
Economic     science,     definition 

of,  106. 
Economic    standard    of   value, 

193,  306. 
Economic   standard    of   value, 

definition  of,  196. 
Economic  tests,  262. 
Economy,  political,  106. 
Ely,    Richard   T.,  113. 
Emerson,  Ralph  Waldo,  352. 
Equal    freedom,    law    of,    300, 

301,  411. 


Equality    of   opportunity,    300, 

301,  307,  311,  347,   348. 
Established    order,    16,    20,    24, 

264,  309,  312,  314,   315,  318,   352. 
Established    order,     definition 

of,  278. 
Evolution,  economic,  345. 
Exchange,  56. 
Exchange,  point   of,   101. 

Fisher,  Joseph,  350. 
Flat  rates,  341,  342,  346. 
Franchise,  public  utility,  234. 
Franchise  differential,  156,  298, 

397. 
Franchise  value,  234,  252,  253, 

303. 
Free  silver  movement,  381,  384. 
Free  trade  movement,  381. 
Free    transportation,  -  341,    342, 

346. 
Freedom,    law    of    equal,    300, 

301.   411. 

George,  Henry,  382. 

Government,  reason  for,  17,  23. 

Governmentalism,  17,  20. 

Governinent,  economic  func- 
tion of,  261. 

Grange  movement,  381,  387. 

Greenback  movement,  381,  383. 

Greenbacks,    213,    346. 

Ground  rent,   162,  396,  407. 

Ground  rent  and  ground 
value,  157. 

Ground  rent,  law   of,   188. 

Ground  value,   162,  170. 

Ground  value  of  residence 
lots,  162. 

Ground  value,  socialization  of, 
29.   257,   383,   419,   420. 

Group,  marginal,  81,  84,  144, 
145. 

Huxley,  Thomas  H.,  32. 

Illinois  bureau  labor  statistics, 
report  of,  162,  368. 

Immeasurable  disutility,  97. 

Immeasurable  utility,  92,  367. 

Inadequate  reforms  and  reme- 
dies,  380. 

Industry,  56. 

Industrial  disutility,  71. 

Industrial  utility,  69. 

Individualism.  20,  21,  22. 


INDEX 


-125 


Individualization     of     values, 

?,63. 
Institution  of  property,  16,  17. 
Institutions,  juridical,  79. 
Interest,   128,   129,   189.   190,   191, 

359,   360,   396. 
Interest,   law  of,   188. 
Intermediate  utility,  57. 
Irksomeness,  41,  42. 

Jevons,  W.  S.,  112. 
Jordan,  David  Starr,  356. 
Juridical  institutions,   etc.,   79. 
Justice,  313,  314. 

Labor,  39. 

Labor    cost    theory    of    value, 

111,  119,  120,  145. 
Labor     differential,     155,     295, 

298. 
Labor-form,  40,  41,  71,  150. 
Labor-form,    marginal,    53,    54, 

90,  91,  95. 
Labor-power,  39. 
Labor-power,      common,      153, 

196. 
Labor-power,  superior,   153. 
Labor-time  checks,  26,  27,  280, 

281. 
Labor-time,  social,  26,  280. 
Labor  value,  119,   120. 
Labor  value,  defined,  131. 
Labor   value,    differential,    155. 
Land  differential,  156,  296,  298, 

418. 
Land-form,  121. 
Land-form,  marginal,  144,  294. 
Land-form,    superior,    145,    158. 
Land  tenure,   171,  173,  350. 
Land  value,  123,  124,  137,  302. 
Land  value,  defined,  140. 
Land  value,  forms  of,  158. 
Lennon,  John  B.,  389. 

Malthus,  354,  355. 
Malthusianism,     38.     344,     353, 

354. 
Margin,  economic,  144,  265,  269, 

281,  294. 
Marginal  buyer.  84,  85,  86,  143, 

145,  146,   147. 
Marginal  disutility,  53. 
Marginal  group,  81,  84,   144. 
Marginal  group,   definition   of. 

145. 


Marginal  labor-form,      53,      54, 

90,  91,  95. 
Marginal  land-form,  144,  294. 
Marginal  net  value,   154. 
Marginal  pair,   73,   84.   128,   150, 

269,  281,   294. 
Marginal  producer,  145,  147. 
Marginal  return,    145,    197,    294, 

310. 
Marginal  satisform,  57. 
Marginal  seller,  81,   85,  86.  142. 

146. 
Marginal  utility,  53. 
Marginal  value,    142. 
Marginal  wage,  402. 
Market,  35. 

Market,  abnormal,  79. 
Market,   normal,  79. 
Market  price,  89,  95. 
'Marx,  Karl,  117,  285,  289. 
Matter,  127. 
Matter,    disutility   of,   127,    128, 

193,   346,   395. 
Measurable    disutility,    97,   106. 
Measurable  utility,  92,  106,  367. 
Medium  of  exchange,  201. 
Middle  man,  387,  388. 
Mill,  John  Stuart.  108,  111. 
Milton,   John,   190. 
Mines,   taxation  of,  374. 
Money  question,  196,  363,  384. 
Moneys,  taxation  of,  370. 
Monopoly,    234,    265,    266. 
Monopoly,  complex.  238. 
Monopoly,  compound,    238. 
Monopoly,  simple,   238. 
Monopoly  differential,  156,  297, 

298. 
Monopoly  value,  234. 

Net  salvage,  99. 

Net  value,  94,  95. 

Net  values,    differential,    155. 

Net  values,   marginal,   154. 

Nordhoff,  Charles,  23. 

Normal  conditions,  79. 

Normal  market,  79. 

Oil  lands,  taxation  of,   374. 
Omnisocialism.  26.  276,  279,  299. 

315,  318,  353,   388. 
Omnisocialism,    defined,    292. 
Onerous  utility,  44. 
Order,   established,    16,    20,    24. 

264. 


426 


INDEX 


Origin  of  values,  127. 
Ordinary  trade-form,  76. 

Patent  rights,  231,  304,  397. 
Personal     property,     taxation 

of,  367. 
Perry,  A.  L,..  112. 
Pliny,  352. 

Point  of  alternative  cost,  99. 
Point  of  disutility,   43,  93,  94. 
Point  of  exchange,  101. 
Point  of  immeasurable  utility, 

101. 
Point  of  positive  utility,  45,  93, 

94. 
Point  of  spontaneity,  43. 
Political  economy,  106,  309,  353, 

390. 
Political    economy,    standard. 

25,   240,   241,   269,   271,   329,   407. 
Populist  movement,  381,  384. 
Positive   theory  of  value,  114, 

121. 
Positive  utility,  45. 
Positive  utility,  point   of,   46. 
Present  conditions,  79, 
Present  worth,  162. 
Price,  89,  100,  281.   301. 
Privilege,   differential,   228. 
Producer,  56,  125,   301. 
Producer,  marginal,  145,  147. 
Production,   56,  125. 
Prohibition      movement,      381, 

383. 
Property,  basis  of,  365. 
Property,  institution  of,  16,  17. 
Protective  tariff,   274,   301,   304, 

305,   386,  413. 
Public  utilities,  231,  233. 
Pure  capital,  130,  131,  149. 

Reforms  and  remedies,  inade- 
quate, 380. 

Relative  disutility,  70. 

Relative  utility,  55. 

Rent,  ground,  162. 

Rent,  law  of,  188. 

Residence  lots,  ground  value 
of,    162,   282. 

Return,  marginal,  145.  197,  294, 
310. 

Salvage,  net,  99. 
Satisform,  57. 
Satisform,  marginal,   57. 
Schaffle,  Dr.  A..  27. 


Seller,  capable,  74. 
Seller,  marginal,  81,  146. 
Seller  is   a  producer,   116,   117. 

125,    126,    160,   301. 
Senior,  N.  W.,  285. 
Service,  39. 
Shearman,     Thomas     G..     400. 

401. 
Slavery,  essence  of,  365. 
Smith,  Adam,  250.  251.  253,  254, 

273. 
Socialists,  Bellamy,   28,  29. 
Socialists.  Christian,  28. 
Socialists.  Marxian,  28,  29. 
Socialism.  20. 

Socialism,  quintessence  of.  27. 
Socialism,  sporadic,  21. 
Socialism,  systemic,    21,    26. 
Social  disutility,  348,  361,  362. 
Social  labor-time,   26. 
Social  solidarity,  409,   419. 
Socialization     of     utility,     103, 

230,  272.  277,   299,  366,  401,  402. 
Socialization    of    values,     246, 

383 
Space,    disutility    of,    127.    128, 

193.    343,    346,    395. 
Sporadic  socialism,   21. 
Spontaneity,   point  of,  43. 
Spontaneous  utility,  44. 
Standard    economists,     22,     24, 

353. 
Standard     of     deferred     pay- 
ments,   208,   209,    210,   220,    221. 
Standard  of  value,  196. 
Standing   aside,    138,    139,    140, 

419. 
State,  the,  16. 
State,    economic    function    of, 

261,   262. 
State,  economic  effect  of,  396. 
Submerged  element,  312. 
Superior  labor-power,  153. 
Superior  land-form,  145. 
Systemic  socialism,   21,  26. 

Tariff   for   revenue    only,    384, 

385,   386. 
Tariff,  protective,  231,  274,  386. 

413. 
Tariff  system,  273,  399,  400,  401, 

402. 
Taxation,   246,  407. 
Taxation  of  bankers,  etc.,  370, 

371. 


INDEX 


427 


Taxation    of   credits,    371,    372, 

373. 
Taxation    of    ground     values, 

370. 
Taxation  of  mines,   374. 
Taxation  of  moneys,  370. 
Taxation     of     personal     prop- 
erty, 367. 
Taxation,    Smith's    canon    of, 

250,  251,  253.  254,  273. 
Taxation,    true   canon    of,    255, 

256.   257. 
Temperance     movement,     381, 

382,  383. 
Time,    disutility    of,    127,    128, 

129,    193,   343,    346,   395. 
Tolstoi,  Leo,  315. 
Trade-form,  71. 
Trade-form,  current,  76. 
Trade-form,  ordinary,  76. 
Transportation,  340,  363. 
Transportation,   flat  rate,    341, 

342,  346. 
Transportation,   free,   341,   342, 

346. 
Trade  union,  267.  388. 
Trust   monopoly,   238. 


Utility,   socialization     of,    103, 
230,  272,  277,  299,  366,  401.  402. 
Utility,  spontaneous,  44. 
Utility,  ultimate,  57. 


Utility, 
Utility, 
Utility, 
Utility, 

of,  92, 
Utility, 
Utility, 
Utility, 
Utility, 
Utility. 

367. 
Utility, 
Utility. 

able. 
Utility, 


40. 

absolute,  55. 
commercial,  69. 
common  marginal  unit 

immeasurable,   92,   367. 
industrial,  69. 
intermediate,   57. 
marginal,  53. 
measurable,     92,     106, 

onerous,  44. 
point     of     immeasur- 
101. 
relative,  55. 


Value, 
Value, 
Value, 
Value, 

196. 
Value, 

303. 
Value, 
Value, 
Value, 
Value, 
Value, 
Value, 
Value, 

121. 
Value, 

chise, 
Values, 

363. 
Values, 
Values, 


92,  108,   281,  301. 
capital,  131. 
differential,   142,    228. 
economic   standard  of, 

franchise,   234,  252,   253, 

ground,  162,  170.  » 

labor,  131. 
land,  140. 
marginal,   142. 
monopoly,    228. 
net,   89,   94,   95. 
positive  theory  of,  114, 

public     utility     fran- 
234,  252,  253. 
individualization    of, 

origin  of,  127. 
socialization   of,   246. 


Wages,  185.  186,  188,  189,  197, 
206,   294,  363,   396,  402. 

Wages,  law  of,  188. 

Walker,  Francis  A.,  111. 

Wayland,  Francis,  111. 

Willard,  Frances  E.,  382. 

Working  plan  of  bisocialism, 
300,  315,   345,  347,  352,  362.  386. 

Working  plan  of  individual- 
ism, 22. 

Working  plan  of  omnisocial- 
ism.  280. 

Year's  purchase,  one,  237. 
Tears'  purchase,  meaning,  161. 


Dare  D 

ue 

FORM    336     4SM      10 

-41 

i 


330. 1     T863B    500408 


